FTC and Justice Department sue TikTok over alleged child privacy violations

A laptop keyboard and TikTok logo displayed on a phone screen are seen in this multiple exposure illustration.

Image Credits: Jakub Porzycki/NurPhoto / Getty Images

The U.S. Federal Trade Commission and the Justice Department are suing TikTok and ByteDance, TikTok’s parent company, with violating the Children’s Online Privacy Protection Act (COPPA). The law requires digital platforms to notify and obtain parents’ consent before collecting and using personal data from children under the age of 13.

In a press release issued Friday, the FTC’s Bureau of Consumer Protection said that TikTok and ByteDance were “allegedly aware” of the need to comply with COPPA, yet spent “years” knowingly allowing millions of children under 13 on their platform. TikTok did so, the FTC alleges, even after settling with the FTC in 2019 over COPPA violations; as a part of that settlement, TikTok agreed to pay $5.7 million and implement steps to prevent kids under 13 from signing up.

“As of 2020, TikTok had a policy of maintaining accounts of children that it knew were under 13 unless the child made an explicit admission of age and other rigid conditions were met,” the FTC wrote in the press release. “TikTok human reviewers allegedly spent an average of only five to seven seconds reviewing each account to make their determination of whether the account belonged to a child.”

TikTok and ByteDance maintained and used underage users’ data, including data for ads targeting, even after employees raised concerns and TikTok reportedly changed its policy not to require an explicit admission of age, according to the FTC. More damningly, TikTok continued to allow users to sign up with third-party accounts, like Google and Instagram, without verifying that they were over 13, the FTC adds.

The FTC also found issue with TikTok Kids Mode, TikTok’s supposedly more COPPA-compliant mobile experience. Kids Mode collected “far more data” than needed, the FTC alleges, including info about users’ in-app activities and identifiers that TikTok used to build profiles (and shared with third parties) to try to prevent attrition.

When parents requested that their child’s accounts be deleted, TikTok made it difficult, the FTC said, and often failed to comply with those requests.

“TikTok knowingly and repeatedly violated kids’ privacy, threatening the safety of millions of children across the country,” FTC chair Lina Khan said in a statement. “The FTC will continue to use the full scope of its authorities to protect children online — especially as firms deploy increasingly sophisticated digital tools to surveil kids and profit from their data.”

TikTok had this to share with TechCrunch via email: “We disagree with these allegations, many of which relate to past events and practices that are factually inaccurate or have been addressed. We are proud of our efforts to protect children, and we will continue to update and improve the platform. To that end, we offer age-appropriate experiences with stringent safeguards, proactively remove suspected underage users, and have voluntarily launched features such as default screen time limits, Family Pairing, and additional privacy protections for minors.”

The FTC and Justice Department propose fining TikTok and ByteDance civil penalties up to $51,744 per violation per day and a permanent injunction to prevent future COPPA violations.

FTC and Justice Department sue TikTok over alleged child privacy violations

A laptop keyboard and TikTok logo displayed on a phone screen are seen in this multiple exposure illustration.

Image Credits: Jakub Porzycki/NurPhoto / Getty Images

The U.S. Federal Trade Commission and the Justice Department are suing TikTok and ByteDance, TikTok’s parent company, with violating the Children’s Online Privacy Protection Act (COPPA). The law requires digital platforms to notify and obtain parents’ consent before collecting and using personal data from children under the age of 13.

In a press release issued Friday, the FTC’s Bureau of Consumer Protection said that TikTok and ByteDance were “allegedly aware” of the need to comply with COPPA, yet spent “years” knowingly allowing millions of children under 13 on their platform. TikTok did so, the FTC alleges, even after settling with the FTC in 2019 over COPPA violations; as a part of that settlement, TikTok agreed to pay $5.7 million and implement steps to prevent kids under 13 from signing up.

“As of 2020, TikTok had a policy of maintaining accounts of children that it knew were under 13 unless the child made an explicit admission of age and other rigid conditions were met,” the FTC wrote in the press release. “TikTok human reviewers allegedly spent an average of only five to seven seconds reviewing each account to make their determination of whether the account belonged to a child.”

TikTok and ByteDance maintained and used underage users’ data, including data for ads targeting, even after employees raised concerns and TikTok reportedly changed its policy not to require an explicit admission of age, according to the FTC. More damningly, TikTok continued to allow users to sign up with third-party accounts, like Google and Instagram, without verifying that they were over 13, the FTC adds.

The FTC also found issue with TikTok Kids Mode, TikTok’s supposedly more COPPA-compliant mobile experience. Kids Mode collected “far more data” than needed, the FTC alleges, including info about users’ in-app activities and identifiers that TikTok used to build profiles (and shared with third parties) to try to prevent attrition.

When parents requested that their child’s accounts be deleted, TikTok made it difficult, the FTC said, and often failed to comply with those requests.

“TikTok knowingly and repeatedly violated kids’ privacy, threatening the safety of millions of children across the country,” FTC chair Lina Khan said in a statement. “The FTC will continue to use the full scope of its authorities to protect children online — especially as firms deploy increasingly sophisticated digital tools to surveil kids and profit from their data.”

TikTok had this to share with TechCrunch via email: “We disagree with these allegations, many of which relate to past events and practices that are factually inaccurate or have been addressed. We are proud of our efforts to protect children, and we will continue to update and improve the platform. To that end, we offer age-appropriate experiences with stringent safeguards, proactively remove suspected underage users, and have voluntarily launched features such as default screen time limits, Family Pairing, and additional privacy protections for minors.”

The FTC and Justice Department propose fining TikTok and ByteDance civil penalties up to $51,744 per violation per day and a permanent injunction to prevent future COPPA violations.

Tesla shareholders sue Musk for starting competing AI company

Image Credits: Patrick T. Fallon / Bloomberg / Getty Images

Tesla shareholders are suing CEO Elon Musk and members of the automaker’s board of directors over Musk’s decision to start xAI, which they say is a competing AI company, and then divert talent and resources from Tesla to the new startup. 

The lawsuit is one of the most direct challenges to Musk’s decision to start xAI, and it comes on the heels of his threat to develop AI outside of Tesla unless he is awarded more voting control over the company. 

The suit was also filed just a few hours before Tesla is scheduled to host its annual meeting, where shareholders will likely vote to re-ratify the $56 billion compensation package that was struck down by a judge earlier this year.

Musk has long claimed that Tesla’s real value is that it’s not just a maker of electric vehicles, but that it’s actually an AI company. That claim is one reason why Tesla’s stock is priced as high as that of a tech company, and more valuable than all four top automakers combined.

This new complaint was filed Thursday by Cleveland Bakers and Teamsters Pension Fund in Delaware Chancery Court, Daniel Hazen and Michael Giampietro on behalf of Tesla itself. In it, they allege that Musk and members of Tesla’s board breached fiduciary duties to shareholders and unjustly enriched Musk by allowing the CEO to launch a competing company.

The plaintiffs in the case also say that Musk violated Tesla’s code of business ethics by creating and leading xAI, and that the board has allowed Musk to continue to violate this code unimpeded. They are asking the court to force Musk to disgorge his stake in xAI and hand it over to Tesla. 

“The notion that the CEO of a major, publicly traded Delaware corporation could — with the evident approval of his board — start a competing company, and then divert talent and resources from his corporation to the startup, is preposterous,” the complaint reads. It compares Musk’s actions to a hypothetical situation involving the CEO of Coca-Cola starting a rival soft-drink company and sending ingredients to it.

Musk launched xAI in 2023 and recently pulled in $6 billion in funding for the startup that aims to compete with rivals like OpenAI, Microsoft and Alphabet. 

The plaintiffs note that, soon after, Tesla began diverting talent and resources from Tesla to xAI. The lawsuit says at least 11 employees have joined xAI directly from Tesla, and points to how Tesla has reportedly been providing xAI access to its AI-related data. 

The plaintiffs also point to CNBC’s reporting that Musk diverted a sizable shipment of AI processors from Nvidia that had been reserved for Tesla to his social media company X, formerly known as Twitter. Musk had posted on X a few weeks prior that Tesla would spend $10 billion this year “in combined training and inference AI,” and he’s also said that Nvidia’s pricey chips would be needed to help Tesla grow into a “leader in AI & robotics.”

Musk admitted to diverting the chips to X, claiming that Tesla’s new data center in Texas was still under construction and didn’t have room to store them.

“The Board has allowed Musk—the CEO and largest stockholder of Tesla—to found and lead another AI company; to plunder resources from Tesla and divert them to xAI; and to create billions in AI-related value at a company other than Tesla,” the plaintiffs write. “Consistent with its long history of obsequiousness to Musk, the Tesla Board has utterly failed to even attempt to meet its unyielding fiduciary duty to protect the interests of Tesla and its stockholders in the face of Musk’s brazen disloyalty.”

Earlier this week, other Tesla shareholders filed a separate suit against Musk, claiming he made billions of dollars by selling the automaker’s stock in 2021 and 2022 by using insider information.

Tesla shareholders sue Musk for starting competing AI company

Image Credits: Patrick T. Fallon / Bloomberg / Getty Images

Tesla shareholders are suing CEO Elon Musk and members of the automaker’s board of directors over Musk’s decision to start xAI, which they say is a competing AI company, and then divert talent and resources from Tesla to the new startup. 

The lawsuit is one of the most direct challenges to Musk’s decision to start xAI, and it comes on the heels of his threat to develop AI outside of Tesla unless he is awarded more voting control over the company. 

The suit was also filed just a few hours before Tesla is scheduled to host its annual meeting, where shareholders will likely vote to re-ratify the $56 billion compensation package that was struck down by a judge earlier this year.

Musk has long claimed that Tesla’s real value is that it’s not just a maker of electric vehicles, but that it’s actually an AI company. That claim is one reason why Tesla’s stock is priced as high as that of a tech company, and more valuable than all four top automakers combined.

This new complaint was filed Thursday by Cleveland Bakers and Teamsters Pension Fund in Delaware Chancery Court, Daniel Hazen and Michael Giampietro on behalf of Tesla itself. In it, they allege that Musk and members of Tesla’s board breached fiduciary duties to shareholders and unjustly enriched Musk by allowing the CEO to launch a competing company.

The plaintiffs in the case also say that Musk violated Tesla’s code of business ethics by creating and leading xAI, and that the board has allowed Musk to continue to violate this code unimpeded. They are asking the court to force Musk to disgorge his stake in xAI and hand it over to Tesla. 

“The notion that the CEO of a major, publicly traded Delaware corporation could — with the evident approval of his board — start a competing company, and then divert talent and resources from his corporation to the startup, is preposterous,” the complaint reads. It compares Musk’s actions to a hypothetical situation involving the CEO of Coca-Cola starting a rival soft-drink company and sending ingredients to it.

Musk launched xAI in 2023 and recently pulled in $6 billion in funding for the startup that aims to compete with rivals like OpenAI, Microsoft and Alphabet. 

The plaintiffs note that, soon after, Tesla began diverting talent and resources from Tesla to xAI. The lawsuit says at least 11 employees have joined xAI directly from Tesla, and points to how Tesla has reportedly been providing xAI access to its AI-related data. 

The plaintiffs also point to CNBC’s reporting that Musk diverted a sizable shipment of AI processors from Nvidia that had been reserved for Tesla to his social media company X, formerly known as Twitter. Musk had posted on X a few weeks prior that Tesla would spend $10 billion this year “in combined training and inference AI,” and he’s also said that Nvidia’s pricey chips would be needed to help Tesla grow into a “leader in AI & robotics.”

Musk admitted to diverting the chips to X, claiming that Tesla’s new data center in Texas was still under construction and didn’t have room to store them.

“The Board has allowed Musk—the CEO and largest stockholder of Tesla—to found and lead another AI company; to plunder resources from Tesla and divert them to xAI; and to create billions in AI-related value at a company other than Tesla,” the plaintiffs write. “Consistent with its long history of obsequiousness to Musk, the Tesla Board has utterly failed to even attempt to meet its unyielding fiduciary duty to protect the interests of Tesla and its stockholders in the face of Musk’s brazen disloyalty.”

Earlier this week, other Tesla shareholders filed a separate suit against Musk, claiming he made billions of dollars by selling the automaker’s stock in 2021 and 2022 by using insider information.