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TikTok faces a mountain of litigation over child safety and privacy, a big risk for potential bidders vying to save the popular video app in the US. Collectively, an estimated 1,500 pending lawsuits carry billions of dollars in potential exposure over allegations that the platform is fueling a youth mental-health crisis and preying on users’ sensitive private information for profit. Unresolved lawsuits typically carry over in a corporate takeover to the acquiring company, and the complaints against TikTok would also transfer if its China-based parent, ByteDance Ltd, sells operations for 170 million American subscribers to a US buyer, according to Curtis Milhaupt, a Stanford University law professor.
ByteDance is named as a defendant alongside TikTok in the vast majority of the suits. A US buyer might try to negotiate with ByteDance for a guarantee that the Chinese company will cover all costs of resolving the litigation, or factor the risk uncertainty into the sale price, the professor said. "I’m sure potential buyers are aware of this issue and are trying to figure out how to deal with these potential liabilities,” Milhaupt said.
TikTok representatives didn’t immediately respond to a request for comment. Under a law passed by Congress, the video app was facing a nationwide ban starting Jan 19 after its Chinese parent company failed to divest its US operations to ease national security concerns. But Donald Trump intervened the next day after he was sworn in as president, signing an executive order to delay enforcement of that law and give ByteDance more time to find a buyer.
On Wednesday, ahead of the new April 5 deadline to make a deal, Trump met with top officials including Vice President JD Vance, who’s heading efforts to orchestrate a sale of the platform’s US operations. Last month, the president had said he was negotiating with four potential bidders, without identifying any of them. One proposal being considered by the White House would involve Oracle Corp.
and Blackstone Inc. and potentially other investors in a joint venture. Publicly known offers also include one from a group led by billionaire Frank McCourt and Reddit co-founder Alexis Ohanian, another featuring tech entrepreneur Jesse Tinsley and YouTube star MrBeast, and a merger offer by San Francisco-based Perplexity AI.
Amazon.com Inc also has made an offer. For prospective buyers, the biggest litigation threat to TikTok on the data privacy front may be a lawsuit brought last year by the US Justice Department during Joe Biden’s administration.
The suit alleged the app has allowed millions of children under the age of 13 to create accounts without their parents’ knowledge or consent – and did so even after reaching a 2019 settlement with the Federal Trade Commission related to kids’ privacy. In the 2019 pact, TikTok agreed to pay US$5.7mil (RM25.
20mil) to resolve the FTC claims. But this time around, the US is seeking penalties as high as US$51,744 (RM228,828) per violation per day, which could add up to hundreds of millions of dollars if the government prevails. TikTok has said it disagrees with the privacy claims and that many of them are inaccurate or have been addressed.
It’s unclear if the Trump administration, which has been reversing some Biden-era enforcement actions and prosecutions, will continue with the case. If it does, a loss for TikTok may mean financial risk for its new owners. Even if the administration drops the case, TikTok faces numerous class-action suits by parents alleging that the company routinely violates the Children’s Online Privacy Protection Act.
Last year, the company set aside US$1bil (RM4.42bil) to cover future privacy penalties by the European Union after it was hit with a €345mil (RM1.69bil or US$381.
2mil) fine by an Irish regulator for misusing children’s data. And the same regulator is expected to issue another fine of more than €500mil (RM2.45bil) later this month for illegally shipping European users’ data to China, Bloomberg reported.
As for child safety, TikTok and three other owners of US social media giants – Meta Platforms Inc, Alphabet Inc’s Google and Snap Inc – together face a barrage of suits alleging they are dangerously addictive for youths. Kids and their parents have filed more than 1,000 personal-injury complaints in state and federal courts in California accusing the companies of knowingly hooking users before they reach their teens. Several hundred additional complaints by public school districts across the US claim the platforms have created a public nuisance that’s undermining the educational system.
TikTok has called the claims inaccurate and is appealing some of the rulings that have allowed the addiction suits to advance. Bloomberg Intelligence has estimated that the social media companies’ combined exposure from the addiction litigation could reach into the billions of dollars. More than a dozen state attorneys general also have sued TikTok, alleging last year that the company deceived users about its child safety tools and deployed harmful features to keep children on the platform longer to maximize profits.
The company has called the claims "inaccurate and misleading”. A complaint by Utah claims that TikTok’s live video feature grooms children for sex trafficking. TikTok says the lawsuit ignores proactive measures the company has voluntarily implemented to support community safety and well-being.
The company also faces claims by former content moderators who have alleged they were psychologically harmed on the job – watching hours of disturbing videos, including displays of bestiality, necrophilia and violence against children. But TikTok was able to avoid a class-action lawsuit on behalf of thousands of workers by moving the complaints into closed-door, one-on-one arbitration proceedings. – Bloomberg.
