TikTok in Europe's crosshairs as U.S. mulls ban on Chinese-owned … – CNBC

TikTok is beginning to feel the sting of political and regulatory pressure in Europe, where the Chinese-owned app has largely evaded the scrutiny it’s faced in the U.S.

EU Commissioner of the Internal Market Thierry Breton warned TikTok CEO Shou Zi Chew in a meeting this month the bloc could ban the app if it didn’t comply with new rules on digital content well ahead of a Sep. 1 deadline.

That’s a marked shift from the EU’s near silence on TikTok, while U.S. lawmakers have been aggressive — banning the app from federal devices in December over national security concerns. A proposed bipartisan bill also seeks to block the app from operating in the U.S.

It’s not that the EU is soft on tech. Europe has fined U.S. tech giants for violating the EU’s General Data Protection Regulation.

The difference with TikTok is that the app has kept out of the crosshairs of commercial interests in Europe.

“There is no political demand for investigation into Chinese entities,” Hosuk Lee-Makiyama, the director of think tank the European Centre for International Political Economy, said in an interview in December.

“The user base of TikTok is a lot bigger than a lot of people in Europe think,” he said. But, he added, “you’re not going to look very closely if they don’t steal too much from your ad revenue.”

TikTok had about 275 million monthly active users in Europe as of December, according to Sensor Tower’s Abe Yousef, noting that’s more than one third of Europe’s population of about 750 million.

TikTok was the most-downloaded social media app last year in Italy and Spain, according to data.ai, formerly called App Annie. The app held second place in France and Germany, the data showed.

WhatsApp, owned by Facebook parent Meta, ranked first among social media app downloads in France and Germany, and third in Italy and Spain, according to data.ai.

Meta reported $29.06 billion in European revenue in 2021, a region the company defined as including Russia and Turkey. In contrast, TikTok recorded turnover of just $531 million in the European Union in 2021, according to the latest available filing in the U.K. But that was well over four times what was disclosed for 2020.

“It takes a little bit of time for the European Commission to get its act together on these issues,” said Dexter Thillien, lead tech and telecoms analyst at The Economist Intelligence Unit.

“It’s not because of a lack of willingness from the European Commission to do something,” Thillien told CNBC in a phone interview. “They’ve got their hands full with bigger companies.”

TikTok isn’t yet a behemoth at the scale of companies like Meta, Alphabet and Amazon when it comes to social media, advertising and e-commerce. But TikTok has become so popular that its app has inspired copycat products, such as Meta’s Reels short video feature.

More than half of people aged 16 to 24 in France and Germany use TikTok, according to data.ai.

Since its launch in 2016, TikTok has amassed a worldwide monthly user base of more than 1 billion, and cemented the careers of well-known media personalities, from the D’Amelio sisters to Addison Rae.

That gives it an attractive pool of data to train its algorithms to target users aggressively with content most aligned with their interests. TikTok’s parent, Beijing-based ByteDance, has found similar success in China with a local version of the app, called Douyin.

A big fear among U.S. intelligence officials — and increasingly lawmakers in Europe, as well — is that Beijing could influence how TikTok targets its users to engage in propaganda or censorship.

“TikTok’s success is the result of a European policy failure,” Moritz Korner, a member of the European Parliament for Germany’s Free Democratic Party, told CNBC via email.

“From a geopolitical perspective, the EU’s inactivity towards TikTok has been naive.”

Korner has been calling on the European Commission to pressure data protection authorities into taking action against TikTok since 2019. He is worried the platform poses “several unacceptable risks for European users,” including “data access by Chinese authorities, censorship, [and] tracking of journalists.”

“The data dragon TikTok must be placed under the surveillance of the European authorities,” said Korner. “Europe must finally wake up.”

Last month, ByteDance admitted to using two journalists’ TikTok data to locate their physical movements, according to a widely-reported internal memo. Surveillance concerns, in addition to the EU’s tough Digital Services Act, were a big topic of conversation in Chew’s meetings with EU officials earlier this month.

The DSA, which was approved last year, is yet to be applied in Europe. EU officials are pressuring tech giants of all stripes to get their houses in order before a Sep. 1 deadline, including TikTok.

“The EU takes privacy and data protection issues very seriously. And it is building one of the most rigorous regulatory architectures for digital platforms, including TikTok, in the world,” Manuel Muniz, provost at IE University, told CNBC.

Under Chinese counter-espionage and national security rules, TikTok’s parent company ByteDance and other Chinese tech firms would be forced to share user data with Beijing if asked to by the government, experts previously told CNBC.

This was a concern back when the U.S. was pressuring allies to ban Huawei, the Chinese telecommunications giant, in 2019. Addressing the National Intelligence Law in a 2019 press conference, a Chinese government spokesperson said intelligence work should be done “according to law” and urged people to “not take anything out of context.”

China’s Ministry of Foreign Affairs did not immediately respond to a request for comment.

TikTok has admitted that data on its European users can be accessed by employees based in China, but denies it would ever share such information with the Chinese government.

The firm nonetheless says it is committed to creating a robust system for processing the data of Europeans within Europe.

That reflects a major difference: European regulators have focused on data processing, while U.S. regulators look for national security threats.

Meanwhile, investigations into TikTok’s accessing of users’ data in China are “starting to bear fruit,” according to Thillien.

Investigations take time. The Irish Data Protection Commission took nearly five years to end its probe into Meta’s targeted advertising practices, which resulted in a fine of more than $400 million.

The commission is examining whether the transfer of user data from TikTok to China and processing of data on minors is in breach of the bloc’s strict GDPR privacy rules. An outcome in the Irish privacy probe isn’t expected until late this year or 2024.