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TikTok’s American makeover just took a bruising

By Tim Culpan

You can’t get much more American than Disney. So it was quite a coup when a Chinese upstart managed to snag one of the family entertainment giant’s senior executives.

Kevin Mayer was head of Walt Disney Co.’s streaming business before Beijing-based ByteDance Inc. tapped him to become chief executive officer of TikTok, the company’s short-video service for international markets. Less than four months later, he’s now gone from ByteDance, whose $140 billion valuation makes it the world’s biggest unicorn.

Beyond losing a CEO, Mayer’s departure bruises TikTok’s makeover into an American company that’s not beholden to the Chinese government. President Donald Trump alleges that it’s a national security threat because of close links to Beijing and access to data on U.S. users. He’s issued an executive order that essentially forces a sale to a non-Chinese buyer.

As my colleague Tara Lachapelle wrote when Mayer was appointed in May, he’d been considered a front-runner to lead the Magic Kingdom upon Bob Iger’s departure before the job went to Bob Chapek. Being passed over may have been a reason for Mayer to jump ship. Or it could have been the prospect of a lucrative package at a fast-growing company. Perhaps he simply wanted to lead an exciting new business on the cutting edge of entertainment and technology.

Whatever Mayer’s motives, one thing is certain: A key reason for ByteDance to hire him was to put an American face on a Chinese company trying to shed its roots and become a U.S. entity porced from even the perception of any ties to Beijing. Indeed, in suing the U.S. government this week, TikTok offered the nationality of its senior management as proof of its U.S. credentials.

The key personnel responsible for TikTok, including its CEO, Global Chief Security Officer, and General Counsel, are all Americans based in the United States—and therefore are not subject to Chinese law.

Mayer may have been a little naive. At the time of his appointment, Washington had already launched a national security review of the TikTok app, which curates user-generated short videos and has over 100 million U.S. subscribers. The Federal Trade Commission had fined ByteDance for violating children’s privacy. One user had become famous for being censored due to her camouflaged message of support for the rights of China’s Uighur minority.

Remember that the Trump administration had previously launched attacks on other Chinese companies, including ZTE Corp. and Huawei Technologies Co., while dozens more had been placed on blacklists over national security concerns.

Mayer should have seen what was coming, namely a push to either ban TikTok or force its separation from ByteDance. Yet his statement to staff, obtained by Bloomberg News, indicates he couldn’t, or wouldn’t, adapt to the change foisted upon him.

“As the political environment has sharply changed, I have done significant reflection,” the memo says. “I understand that the role that I signed up for — including running TikTok globally — will look very different as a result of the U.S. administration’s action to push for a selloff of the U.S. business.”

To be fair, the full circumstances of his resignation aren’t clear. It’s possible that Mayer was asked to leave, or that his departure was a precondition to a sale that’s due to be announced within weeks. There may be other factors that have yet to come to light, so he deserves some benefit of the doubt.

What’s not in question is the setback for TikTok and its parent, ByteDance. Mayer’s appointment brought with it the gravitas of a seasoned, experienced professional at the top of his game with more than 15 years at the world’s most-respected entertainment company. More importantly, TikTok loses a sense of Americanism that it desperately needs.

Even if the forced sale does go through — there’s a Sept. 15 deadline — TikTok will continue to face suspicion among those wary of Chinese influence, especially as the U.S. heads into a presidential election in which Beijing is a convenient scapegoat for many of the country’s troubles.

His role will temporarily be filled by General Manager Vanessa Pappas (who is of Greek-Australian heritage and a long-term U.S. resident). While a permanent CEO will also likely be a Westerner, Mayer’s short stint signals the kind of instability TikTok can ill-afford right now.

Win, Lose or Settle: Facebook antitrust lawsuits will take years to resolve

WASHINGTON: Facebook, faced with two major antitrust lawsuits, could be forced to breakup, settle with changes to its business, or it could prove its government challengers wrong and win in court, antitrust experts said.

The Federal Trade Commission and a major coalition of states are asking that Facebook be forced to sell WhatsApp and Instagram, saying it used a “buy or bury” strategy to snap up rivals and keep smaller competitors at bay.

THE FTC AND STATES WIN

If the government wins, the judge could rule Facebook must pest its photo sharing app Instagram and messaging app WhatsApp.

“At first blush, it’s a very strong case on the merits. The remedy is tough, because breakup is an unusual remedy, but it certainly may be merited here,” said Sam Weinstein, who teaches at Cardozo Law.

While a “breakup remedy” is rare, Weinstein said, “this is a case where it’s possible, I’d say, and maybe even likely.” He noted the Facebook case contained damning evidence from the company’s own documents, unlike the Justice Department’s lawsuit against Google.

Although breakup is not common, even on a small scale, in 2014 the Justice Department sued BazaarVoice after it bought PowerReviews and forced the deal between the consumer review sites to be undone. Most famously it forced the breakup of the telephone company ATT in 1982.

President-elect Joe Biden’s incoming administration, which did not respond to a request for comment, would also likely support the lawsuit. FTC commissioners voted 3-2 to file its lawsuit with two of the three votes in favor coming from Democrats.

A FACEBOOK WIN
One difficulty the FTC will face is that it cleared Facebook’s purchase of Instagram in 2012 and WhatsApp in 2014 — a point Facebook made in its response https://about.fb.com/news/2020/12/lawsuits-filed-by-the-ftc-and-state-attorneys-general-are-revisionist-history to the lawsuits.

“It’s very difficult to unwind a consummated merger that’s been in place for years,” said Seth Bloom of Bloom Strategic Counsel. “A court would be very reluctant to unwind the merger.”

Further, Bloom said the argument in the complaint that Facebook required software developers on its platform to refrain from competing with Facebook was potentially outdated and certainly easy to resolve.

The complaint said: “Specifically, between 2011 and 2018, Facebook made Facebook Platform, including certain commercially significant APIs, available to developers only on the condition that their apps neither competed with Facebook … nor promoted competitors.”

In a blog post, Facebook argued that the restrictions were standard in the industry.

“Companies are allowed to choose their business partners, and it gives platforms comfort that they can open access to other developers without that access being exploited unfairly,” wrote Facebook General Counsel Jennifer Newstead.

Facebook also believes it can prevail in court.

Newstead said the company continues “to operate in a highly competitive space.

“We look forward to our day in court, when we’re confident the evidence will show that Facebook, Instagram and WhatsApp belong together, competing on the merits with great products,” she said.

WILL THE TWO SIDES SETTLE?
With no criminal charges in the lawsuit there is no incentive for Facebook to cut a deal, argues George Hay, who teaches antitrust at Cornell University law school. He also predicted the case would take years of litigation.

“It’s not an obvious winner,” he said of the government’s arguments. “Everything that Facebook does is out in the open and it’s been out in the open for 15 years. They’ve never done anything without consulting with teams of antitrust lawyers.”

Still, Facebook agreed last year to pay $5 billion to resolve an FTC investigation into its privacy practices.