TikTok’s regulatory headaches in the United States just keep coming as a new enforcement action from the Federal Trade Commission (FTC) over violations of children’s privacy laws could soon hit the popular social media platform.

On Tuesday, the agency issued a statement where it publicly disclosed a formal complaint against ByteDance – TikTok’s parent company – regarding a 2019 settlement reached with the platform’s predecessor, Musical.ly, for failing to comply with the country’s Children’s Online Privacy Protection Act (“COPPA”).

FTC Oddly Cites “Future Violations” of COPPA as Reason for Its Complaint

In a brief statement, the FTC claims that it has enough evidence to believe that TikTok is
“violating or are about to violate the law” – an unusual statement that seems to refer to the future and actions that have not yet occurred, resembling a scene from the dystopian classic film starring Tom Cruise, Minority Report.

“The Commission also investigated additional potential violations of COPPA and the FTC Act,” the press release highlighted. “The investigation uncovered reason to believe named defendants are violating or are about to violate the law and that a proceeding is in the public interest, so the Commission has voted to refer a complaint to the DOJ, according to the procedures outlined in the FTC Act.”

The FTC’s statement refers to regulatory action taken by TikTok’s predecessor, which was acquired by ByteDance in 2017. Musical.ly paid $5.7 million that year to resolve allegations that it illegally collected personal information from children without parental consent – a direct violation of COPPA.

An Unprecedented Disclosure

Notably, the FTC opted to publicly disclose that it referred its TikTok complaint to the US Department of Justice (DOJ) – a move that is considered a departure from its standard protocol.

“Although the Commission does not typically make public the fact that it has referred a complaint, we have determined that doing so here is in the public interest,” the agency commented without providing any further details about why this is of public interest while also refusing to disclose the reasoning behind its decision or the scope of the case.

Also read: 100+ TikTok Statistics Updated for June 2024

While the details of the FTC’s complaint remain unclear for now, the announcement has major implications. First, it signals the seriousness of the FTC’s findings and concerns about TikTok’s practices. By going public, the agency is putting immense pressure on the DOJ to take some sort of action against one of the world’s most popular social media platforms in light of what they found.

“We look forward to our continued partnership with the Department of Justice in this and other matters as we advance our shared interest in protecting the American people and in enforcing the law without fear or favor,” the FTC statement added.

TikTok Contests ‘Factually Inaccurate’ Allegations

For its part, TikTok said that it has been cooperating with the FTC’s probe for over a year and strongly disputes the allegations, which a spokesperson characterized as “factually inaccurate” as they are related to “past events and practices that have been addressed.”

“We’re disappointed the agency is pursuing litigation instead of continuing to work with us on a reasonable solution,” TikTok’s spokesperson stated. “We’re proud of and remain deeply committed to the work we’ve done to protect children and we will continue to update and improve our product.”

The company highlighted its age-appropriate safeguards like screen time limits, family pairing features, and default privacy settings for teenagers. “We offer an age-appropriate experience with stringent safeguards, proactively remove suspected underage users, and have voluntarily launched [these] safety features,” the spokesperson stressed.

DOJ Collaborations Opens the Door for a Federal Lawsuit

The DOJ acknowledged that it is consulting with the FTC about its decision to refer the TikTok case to them but did not comment on the substance of the allegations, consistent with its standard policies.

However, by accepting the FTC’s complaint, the door is now open for the DOJ to pursue a federal lawsuit against TikTok and ByteDance over these alleged violations.

If the DOJ chooses to file a lawsuit, TikTok could potentially face massive fines, be forced to implement stricter protections for minors’ data and age verification systems, or even have the app’s operations disrupted depending on the severity of its misconduct.

It would mark an escalation of the US government’s scrutiny of the social media app following the approval of a law that places a ticking close on its head to find investors who take the social media platform off the hands of ByteDance to prevent a nationwide ban.

National Security Concerns Over TikTok Forced the Government to Take Action

The FTC complaint adds another major headache for TikTok as it keeps struggling to appease national security concerns from US officials over its Chinese ownership. In December 2022, the US banned the app from all federal devices and networks due to fears that ByteDance could be sharing American data with Chinese authorities from the country’s ruling party.

Meanwhile, just two months ago, President Joe Biden signed a bill passed by Congress that gives ByteDance until January 2025 to separate all ties with TikTok’s US operations or face a nationwide ban of the app amid these espionage and foreign influence concerns. TikTok has sued to block the law, arguing that it is an unconstitutional violation of free speech.

These new allegations brought up by the FTC could intensify scrutiny from regulators and lawmakers regarding the company’s data-sharing and data-protection practices. It also casts doubts on TikTok’s public discourse regarding its allegedly robust safeguards put in place to protect minors and the personal information of American users.

“TikTok has previously violated children’s data privacy laws,” wrote Rep. John Moolenaar, who chairs the House Select Committee on the Strategic Competition Between the US and China.

“We are gravely concerned that an app controlled by the Chinese Communist Party appears to have the unfettered ability to manipulate the American public, including America’s children,” the lawmaker stressed. He went on to prompt the FTC to take action to investigate these issues.

Why Child Privacy Allegations Are So Damaging to Social Media Companies?

Privacy violations involving children’s data represent a significant threat to any tech company and their financial well-being. There are only a handful of issues that cause so much backlash and public outcry than the potential exploitation or mistreatment of kids online by tech giants. It doesn’t help that a pretty large portion of TikTok users are children, either.

tiktok users by age as of 2022

Previous FTC enforcement actions against YouTube, Facebook/Instagram, and ByteDance’s Musical.ly involved multi-million dollar settlements as they failed to obtain parental consent before tracking children’s online activity for targeted advertising, as required under COPPA.

TikTok has already drawn criticism from lawmakers, advocacy groups, and parents for creating social media addicts as a new generation has grown accustomed to mindless scrolling and being exposed to inappropriate content.

Any direct evidence that the app failed to implement the required legal safeguards to protect the personal data and online privacy of children could have catastrophic results on TikTok’s brand reputation and future growth in Western markets.

‘Unfair and Deceptive’ Business Practices Cited by the FTC as Well

If the stack of potential COPPA breaches wasn’t bad enough, the FTC also suggested that its investigation uncovered evidence that TikTok and ByteDance engaged in “unfair or deceptive” business practices that would violate the FTC Act in terms of data usage.

Reports from earlier this year indicated that the FTC was probing if TikTok intentionally misled both users and US authorities about its data flows and storage practices. More specifically, this could point to ByteDance providing access to data from US users to employees in China.

The app has insisted that all American data is safely stored in US-based servers operated by American cloud providers with robust access controls. However, leaked audio from internal meetings seemed to contradict those assurances as ByteDance engineers in Beijing were reportedly able to access US user information easily.

Also read: TikTok Cracks Down on Covert Political Campaigns Amid Ban Threats

Caught in the crossfire, there are nearly 200 million monthly active American users who enjoy accessing TikTok and its content. Many of these users are teens and pre-teens who have made TikTok a cultural sensation without knowledge or concern about how their data is used.

As this new investigation advances and the clock keeps ticking, ByteDance needs to do something to prevent its flagship American asset from being dissected and sold in pieces to the best bidder.

The upcoming US presidential election may be decisive for the company as the reelection of President Biden would likely close the door on any negotiations. Democrats are convinced that TikTok can no longer operate as a subsidiary of ByteDance in the country under their watch.

Meanwhile, a win by the Republicans, which would be delivered by former US President Donald Trump, could result in a new set of ears that may – or may not – benefit the company and its ambitions, depending on what Trump and his administration think about these alleged COPPA violations and the regularly cited national security concerns.