Trump's bid for a piece of Microsoft-TikTok deal could
spur legal action
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[August 05, 2020] By
Alexandra Alper and Echo Wang
WASHINGTON (Reuters) - President Donald
Trump's unprecedented demand that the United States get a cut of the
proceeds from the forced sale of Chinese internet giant ByteDance's
short-video app TikTok is based on an interpretation of U.S law that
regulatory lawyers say may be open to challenges.
The Committee on Foreign Investment in the United States (CFIUS), a U.S.
government panel that reviews deals for potential national security
risks, has given ByteDance until Sept. 15 to negotiate a sale of TikTok
to Microsoft Corp, amid concerns over the safety of personal data that
the app handles under its Chinese parent.
Microsoft has said it is seeking to buy the assets of TikTok in North
America, Australia and New Zealand. It has not disclosed how much it is
willing to pay, though sources previously told Reuters that ByteDance
executives value all of TikTok at more than $50 billion.
"A very substantial portion of that price is going to have to come into
the Treasury of the United States because we're making it possible for
this deal to happen," Trump told reporters on Monday.
CFIUS legislation gives the U.S. government broad authority to seek
mitigation from companies that are jeopardizing national security, legal
While CFIUS has never before sought a cut from the proceeds of a
divestiture it has ordered, the White House could argue that imposing a
fee on Bytedance would deprive it of resources that would otherwise
support China's government on technology initiatives that could harm
U.S. interests, some of the legal experts added.
"It's certainly inconsistent with the intent of Congress ... and with
CFIUS's long-standing concern to maintain a reputation for acting
apolitically and solely on grounds of national security, but it's not
clear that it's outside the president's statutory authority," said Paul
Marquardt, a regulatory lawyer at Cleary Gottlieb.
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China and U.S. flags are
seen near a TikTok logo in this illustration picture taken July 16,
2020. REUTERS/Florence Lo/Illustration/File Photo
The White House, the Treasury Department, Bytedance and Microsoft did not
immediately respond to requests for comment.
U.S. law states that presidential decisions blocking deals on national security
grounds are not subject to judicial reviews. However, a legal challenge is
possible under the fifth amendment of the U.S. Constitution, which prohibits the
government from seizing property without just compensation, as well as other
laws, legal experts said.
While a previous fifth amendment challenge to a CFIUS order had limited success,
this would be the first time a challenge could be mounted against the U.S.
government imposing a deal fee, the experts added.
“This is akin to the Foreign Corrupt Practices Act but on U.S. soil, where the
U.S. government would be able to require what is tantamount to a bribe in order
to obtain a regulatory approval for a business transaction,” DLA Piper lawyer
Nicholas Klein said.
It is not clear if Trump will make good on his demand for a slice of the TikTok
deal proceeds. "I'm not sure it's a specific concept that will be followed
through," White House economic adviser Larry Kudlow told Fox Business News on
(Additional Reporting by David Shepardson; Editing by Greg Roumeliotis and Tom
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