Last Saturday, April 20th, the House passed the Protecting Americans from Foreign Adversary Controlled Applications Act, colloquially referred to as the TikTok Ban, as part of a broader bill addressing foreign aid and sanctions to adversarial nations. Poised to be voted on before the Senate, the debate has mobilized everyone since its original introduction as a standalone Act in January.
The Act would force divestment of TikTok from its parent company and the app would still be available under the one year deadline for ByteDance to find a buyer. TikTok has made it clear that they will fight the Act if it passes- meaning that the app becoming unavailable is a real possibility. In light of this prospect, a feature of these conversations has been the seemingly arbitrary action of the U.S. government to ban such a popular app- probing the intentions of lawmakers along the lines of “What is the difference between Meta (the parent of Instagram and Facebook) having access to my data and ByteDance?” and “Why does it matter that their parent company is foreign owned?”
Background on Foreign Ownership Regulations in Telecommunications
While there have been many potential ulterior motives raised regarding the forced sale of TikTok, it is important to analyze them in the context of how and why the U.S. government regulates foreign ownership of telecommunications. We can’t read the minds of lawmakers, but we do know that the legal distinction between foreign and domestic telecommunications providers is not new. As FCC Chairwoman Jessica Rosenworcel put it, “For decades, we’ve had policies in the Communications Act that would prevent, for instance, a Chinese national or a Chinese company from owning our nation’s broadcast television stations, and yet here we have something arguably among the newer forms of media, and there’s zero oversight. I think that’s stunning.”
Chairwoman Rosenworcel observes that the foreign regulation of telecommunications providers and media companies is nothing new. Foreign media regulations were introduced prior to and during the Cold War under legislation such as FARA (the Foreign Agents Registration Act), requiring registration of foreign-owned media outlets. Foreign owners providing telecommunications services like voice service will frequently be required to submit to regular federal inspections or other conditions to operate in the United States. TikTok not falling under the category of a foreign outlet required to register is not necessarily due to arbitrary choices on behalf of regulators, there are also gaps in regulation that do not capture video content on the internet like traditional TV and radio broadcast.
These issues are also jurisdictional in nature. It is strange to think that one company would be subject to stricter rules than another merely by virtue of foreign ownership – but it matters for the simple reason that the U.S. government has the authority to enforce its laws on American companies located within the U.S., but enforcement of an entity overseas creates a legal minefield. Without jurisdiction, the U.S. cannot enforce what laws do exist to protect user data, promote fair competition, and comply with international agreements.
The Act’s fate is still uncertain, but as it heads to the Senate for a vote and with President Joe Biden poised to sign if it passes, a sale of the app may be necessary to continue U.S. operations. However, the controversy of the Act remains – and prompts questions of how Congress will react the next time a popular, foreign owned media application ends up on millions of American smart phones. In the meantime, Marashlian & Donahue will continue to monitor developments in this area and keep you informed of any changes that may impact your business.
If you have questions about foreign media and telecommunications service provider ownership regulations, please feel free to reach out to the attorney assigned to your account or you may contact Jonathan S. Marashlian at jsm@commlawgroup.com. Our firm is standing by to provide guidance and support for all of your foreign ownership compliance needs.
