DOJ’s ‘sweetheart’ $400M settlement with TikTookay – Business News
The Justice Department’s $400 million deal to settle TikTookay little one privateness allegations has puzzled Beltway insiders over its simple phrases and an uncommon lack of transparency across the decision to the blockbuster case, The Post has realized.
In an Aug. 21 press release on a Friday afternoon — a basic window used for bulletins that hope to get ignored by the media — the DOJ disclosed its truce with TikTookay to settle claims it broke federal law by amassing knowledge on children youthful than 13 in exchange for a $300 million payout.
To the shock of sources briefed on the talks, the DOJ additionally agreed to vacate a 2019 consent order that required TikTookay — managed by Beijing-based Bytedance till January of this 12 months — to bear strict monitoring of its knowledge practices for an additional $100 million.
TikTookay and the DOJ not too long ago struck a $400 million settlement. NurPhoto by way of Getty Images
In most circumstances involving the potential finish of a consent decree, federal companies observe a “formal process” that features detailed explanations about how funds have been calculated, stated Bill Kovacic, a Republican-appointed Federal Trade Commission chairman from 2008 to 2009.
“How did you get to that number? There’s probably some assumption that there were a given number of violations,” Kovacic informed The Post. “Each violation has usually a penalty attached to it. If this were a math exam, show your work. Ordinarily, the public is owed an explanation for that.”
The $400 million settlement appears particularly skimpy after a coalition of state attorneys normal secured an $18 billion deal with Mark Zuckerberg’s Meta final Wednesday in a related case — together with day by day time limits on kids’s social media use.
Fines for violations of the Children’s Online Privacy Act (COPPA) can run up to $53,088 per infraction. The DOJ didn’t disclose the specifics as to how it arrived on the $400 million settlement when penalties might need in any other case risen to tens of billions of {dollars}.
That’s even though such offers are sometimes “made available for public comment” earlier than they take impact, Kovacic added.
A senior DOJ official confirmed that the company reached the $400 million settlement after prolonged negotiations with TikTookay over how many precise COPPA violations had occurred.
The financial penalty was calculated following a review of the DOJ’s prime 5 prior COPPA settlements and was based mostly on a particular quantity of violations by TikTookay, the DOJ official added. The precise quantity of violations and the effective per infraction couldn’t instantly be realized.
TikTookay didn’t return a request for remark.
TikTookay confronted allegations of violating federal knowledge privateness law. Getty Images
As The Post completely reported in May, TikTookay had agreed in precept to pay $1 billion to settle the children’ privateness violations in closed-door negotiations with the FTC that befell in spring 2024. TikTookay was additionally close to agreeing to different key security options – together with a ban on focused promoting for minors and limits on late-night cellphone notifications.
However, the talks quickly fell aside, sources stated, with prime officers on the Biden-era DOJ hesitant over considerations a settlement might undermine a then-active effort to Congress to ban TikTookay by way of laws.
The DOJ first sued TikTookay in August 2024 after the FTC referred its findings that the company turned a blind eye regardless of figuring out that thousands and thousands of children have been bypassing the app’s age restrictions.
Some of the FTC’s investigative findings remained on the cutting-room flooring, in line with a former FTC official with direct information of the scenario.
According to the source, the Biden-era FTC uncovered proof that the firm was exposing the personal knowledge of American customers – together with Social Security and bank account numbers – on the company’s inside message board, which was accessible to workers in China.
Mark Zuckerberg’s Meta agreed to an $18 billion settlement with a coalition of state attorneys normal. Anadolu by way of Getty Images
“We knew that China-based employees accessed information contained within this messaging service that included American users’ personally identifiable information,” the ex-official stated.
The DOJ’s lawsuit nonetheless included a number of bombshell claims – together with that TikTookay ignored dad and mom who requested for his or her children’ accounts to be deleted and would solely take motion if it discovered an “explicit admission” that the consumer was below 13. TikTookay’s moderators allegedly spent an average simply 5 to seven seconds reviewing a flagged account.
In its 28-page movement to vacate the consent order, DOJ argued that TikTookay had “undergone significant changes to its ownership, management, compliance functions, and privacy practices” and “implemented extensive measures” to guard children.
It additionally argued the consent order was no longer within the public curiosity, partly it was imposed on Music.ly, a predecessor of the company that turned TikTookay.
A gaggle of US traders took over majority control of TikTookay in January. REUTERS
Last week, US District Judge George Wu, who oversaw the DOJ’s lawsuit towards TikTookay, famous in a courtroom submitting that neither facet had offered particulars concerning the settlement’s phrases or requested the courtroom to implement them within the occasion of future violations.
“Given the significant issues raised within this litigation and this Court’s interest/curiosity in any resolution so suddenly reached by the parties, it is tempted to inquire of the parties. Unfortunately, the Court concludes that it lacks the power to do so,” Wu wrote in an Aug. 24 courtroom submitting.
In the company’s announcement, DOJ affiliate legal professional normal Stanley Woodward referred to as the TikTookay settlement “a major victory for American children and parents” and stated it could enable “stronger protections without the delay and uncertainty of protracted litigation.”
DOJ affiliate legal professional normal Stanley Woodward referred to as the settlement a “major victory.” Anadolu Agency by way of Getty Images
Critics branded the deal the newest failure to carry TikTookay accountable for exposing children to hurt, relationship back to the Biden administration and thru the present Trump regime, which performed a key position in brokering the sale that led billionaire Larry Ellison’s Oracle and a cadre of US traders take control of the wildly widespread app this 12 months.
Fairplay, a Washington DC-based online security watchdog, is among the many loudest critics of the TikTookay settlement – calling it “a huge disappointment to American families.” Fairplay wished the AGs’ deal with Meta final week was stronger, however that deal a minimum of included vital new protections for teenagers, Fairplay coverage counsel Haley Hinkle informed The Post.
“By contrast, the DOJ’s settlement with TikTok places the company under no new obligations,” Hinkle stated. “Even worse, it relieves TikTookay of its compliance and monitoring obligations below the 2019 consent decree.
“Everyone who cares about children’s privacy and safety should be appalled by this sweetheart deal.”
A senior DOJ official pushed back on the criticism, noting that the company wasn’t concerned within the Meta case and that the $400 million would go on to the US Treasury, moderately than state packages.
TikTookay has made vital adjustments to its knowledge handling and online security practices for the reason that lawsuit was first filed, the official added.
“The TikTok that we settled with in this case was not the same company that the lawsuit was brought against,” the official stated.
As half of the Trump-backed deal to “save” TikTookay, Ellison’s Oracle was joined by a consortium that included Emirati investment fund MGX, US-based Silver Lake and billionaire Michael Dell to kind a new TikTookay US three way partnership.
China-based ByteDance retained a 19.9% stake within the enterprise, which was meant to resolve national security considerations – together with fears that China would use TikTookay to spy on Americans or illicitly collect knowledge.
