Published March 14, 2024

(UPDATE) Federal government reveals it ordered national security review of TikTok in September

TikTok sues US government over law that could ban the social media platform

By Anja Karadeglija

The federal Liberals ordered a national security review of popular video app TikTok in September 2023 but did not disclose it publicly.

"This is still an ongoing case. We can't comment further because of the confidentiality provisions of the Investment Canada Act," a spokesperson for Industry Minister François-Philippe Champagne said. 

"Our government has never hesitated to (take) action, when necessary, if a case under review is found to be injurious to Canada's national security."

The revelation comes after the U.S. House of Representatives passed a bill Wednesday to ban TikTok unless its China-based owner sells its stake in the business.

"We're watching, of course, the debate going on in the United States," Prime Minister Justin Trudeau said Thursday when asked whether Canada would pursue a similar move.

In response to the same question, Champagne's office said that the Liberal cabinet "issued an order for the national security review of TikTok Canada" on Sept. 6. 

It said the review was based on the expansion of a business, which it said constituted the establishment of a new Canadian entity. It declined to provide any further details about what expansion it was reviewing. 

A government database shows a notification of new business from TikTok in June 2023. It said Network Sense Ventures Ltd. in Toronto and Vancouver would engage in "marketing, advertising, and content/creator development activities in relation to the use of the TikTok app in Canada."

The minister's office said the cabinet order to launch the review was not accessible online, as is routine, because the information is protected and confidential under the Investment Canada Act. 

Champagne's office indicated TikTok would be subject to "enhanced scrutiny" under the act under a new policy on foreign investments in the interactive digital media sector released by the government earlier this month.

That policy statement says "hostile state-sponsored or influenced actors may seek to leverage foreign investments in the interactive digital media sector to propagate disinformation or manipulate information in a manner that is injurious to Canada's national security."

The federal government banned TikTok from its mobile devices in February 2023 after federal and provincial privacy commissioners launched their own investigation into the platform.

"As you know, Canada made the determination that no government phones or devices can have the TikTok app. That’s a matter of security and safety," Trudeau said Thursday. 

"I can't comment on national security reviews."

A TikTok spokesperson said the company continues "to co-operate with the government’s review of TikTok’s investment in Canada."

The spokesperson said the company remains "committed to ensuring the safety and security of the platform for the millions of Canadian creators, artists and small businesses who rely on TikTok to earn a living, find community and create jobs." 

Josh Zelikovitz, a lawyer at Goodmans LLP specializing competition and foreign investment, said when national security reviews are launched, typically little information is made public.

He said the national security rules in the Investment Canada Act are designed to let cabinet make orders about non-Canadians who invest in Canada, in cases where those investments “could be injurious to Canada's national security.”

Under the law, certain investors have to notify the government when they acquire control of the Canadian business or establish a Canadian business. The industry minister can then launch a review by a sending a notice to the company, "saying that he has reasonable grounds to believe it could be injurious to national security," Zelikovitz said.

Cabinet can take measures like making investors sell parts of the business or sell shares, or allow them to continue operating as long as they agree to conditions. 

The Canadian government publishes statistics about investments it has reviewed and the investors’ country of origin, and in recent years, a majority of those have been from China, Zelikovitz said.

"The regulator clearly has a lot of interest in Chinese investments in Canada, particularly state-owned and state-influenced investments in Canada."

The Canadian review is not related to the proposed U.S. bill, which is driven by concerns that the company's current ownership structure is a national security threat.

TikTok is a wholly owned subsidiary of Chinese technology firm ByteDance Ltd. 

U.S. lawmakers contend ByteDance is beholden to the Chinese government, which could demand access to the data of TikTok's U.S. consumers, given Chinese national security laws that compel organizations to assist with intelligence gathering.

The bill must still pass the Senate, where lawmakers have indicated it will undergo a thorough review. U.S. President Joe Biden has said if Congress passes the measure, he will sign it.

Nearly 30 per cent of Canadian respondents to an October 2022 survey by Toronto Metropolitan University said they were on TikTok.

For many Canadian creators who make TikTok content, the U.S. market is paramount, said Scott Benzie, executive director of Digital First Canada. The organization advocates for digital creators, and has in the past received funding from TikTok.

"If a ban actually goes through in the U.S., Canadian careers on TikTok are over," he said. 

In addition to losing audience reach, for creators who earn money through sponsorships, "obviously most of those brands want to connect with U.S. audiences, and if that's not a possibility then that money just goes away."

Nathan Kennedy, a personal finance content creator from Hamilton, Ont., said he’s "pretty calm" about the situation, noting threats to ban TikTok have been around for years.

TikTok is his biggest platform, and the majority of his audience is in the United States. He became a full-time content creator two-and-a half years ago. 

"You kind of just have to be even-keel about the whole thing … I literally cannot do anything. It's not even in my country," he said.

He said it's hard to believe a ban will actually happen that causes TikTok to exit the U.S. 

But if the hypothetical worst-case scenario does happen, Kennedy said he would turn to other platforms.

"People are going to be watching content. That's not going to change. It's where they watch their content that might change over time," he said.

"I don't want to sound like I'm being very nonchalant here. But it's one of those things that you have to accept, that it's not your platform, it's not your business. And you kind of have to go to where the attention is."

Banner image: THE CANADIAN PRESS/Sean Kilpatrick

This report by The Canadian Press was first published March 14, 2023. 

— With files from The Associated Press.

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