TikTok case shows Chinese firms can’t neglect FTC rules

By Peng Ling Source:Global Times Published: 2019/3/12 20:38:40

TikTok case shows China firms can’t neglect FTC rules

Illustration: Luo Xuan/GT

After a near three-year investigation, the US Federal Trade Commission (FTC) recently announced that short-form video app TikTok, also known as Douyin in China, has agreed to pay $5.7 million to settle the FTC case over its violation of the Children's Online Privacy Protection Act (COPPA). TikTok is a bit unlucky to have been slapped with the largest civil penalty the FTC ever obtained in a children's privacy case. The FTC originally targeted a video social networking app named Musical.ly, but in November 2017, TikTok's parent company, ByteDance, spent up to $1 billion to acquire Musical.ly, which, the FTC case alleged, had violated the rights of users under the age of 13 in a number of areas.

For Chinese companies, the FTC is less famed than the Committee on Foreign Investment in the United States (CFIUS). However, as more Chinese companies explore the overseas market, the FTC is another agency that we must study carefully and pay attention to.

Operating for over 100 years, the FTC is a US federal law enforcement agency that promotes competition and protects consumers. As the only federal agency that has a dual mission of consumer protection and enforcing antitrust law, the FTC has a wide range of mandates to pursue strong and efficient enforcement. Any company that appears on its investigation list will often have to pay a high price for violations. 

In recent years, the FTC has gradually shifted its supervision focus to internet companies, with internet giants such as Facebook, Google and YouTube all in its sights. Some critics believe the FTC may be planning to move its enforcement authority to the internet sector and it is trying to obtain jurisdiction over commercial internet sites through the enforcement of privacy policy. On February 26, the FTC announced that it was creating a new special task force led by senior competition officials to investigate potentially anticompetitive conduct by tech giants. 

The move is a clear signal that the FTC's regulation of internet companies is getting increasingly tough. With the rapid development of Chinese internet companies, their overseas expansion has undoubtedly presented an obvious target, which is why Chinese companies must pay high attention to the FTC and must be careful to avoid violating relevant US regulations.

The strategic goal of the FTC is to protect consumers, regulate competitive relationships, and improve organizational performance. Although coverage of the three goals is quite broad, we can still see how the FTC implements these goals from past cases. With the formation of the internet society, consumers' online rights, especially personal information protection, have become an important objective of the FTC. 

Therefore, Chinese companies interested in overseas expansion should pay great attention to it and conduct comprehensive reviews on their products and services.

It is necessary to carefully study the FTC settlement agreement. In the US, the FTC settlement agreement has become an important issue of concern for tech companies. As many companies want to seek guidance for their operations through the study of settlement agreements, they generally attach great importance to analysis of the FTC settlement agreement, reports and enforcement. Some even claim that the FTC settlement agreement is as important as the US Federal Reserve chairman's statement.

In addition to law enforcement, the FTC also adopts methods like holding seminars and issuing reports to promote the protection of consumer privacy and data security. Information about these activities is available under the US Freedom of Information Act, which is helpful for Chinese companies to learn about FTC law enforcement.

As the internet becomes increasingly commercialized, the FTC is more inclined to use its powers of investigation on privacy and data security, and it has started to investigate a variety of "unfair" or "deceptive" behaviors. Consumer privacy has become a key area for regulatory supervision. Almost all FTC investigations into tech giants started out with investigating infringements of consumer privacy, especially violations of juveniles' personal information. 

The FTC has released guidance for businesses based on the lessons learned from 50 FTC law enforcement cases. Chinese companies need to pay close attention to these experiences and lessons, and conduct research and analysis in accordance with their actual conditions and the international investment environment.

The author is deputy director of the research department of the China Law Society. bizopinion@globaltimes.com.cn

Newspaper headline: TikTok case shows China firms can’t neglect FTC rules

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