Recasts, adds comment from lawyer for plaintiffs
Suit seeks to unwind TikTok joint venture, force new deal
Joint venture is crucial to TikTok's survival in the US
Suit says deal fails to meet terms of 2024 divestiture law
By David Shepardson and Andrew Goudsward
WASHINGTON, March 5 (Reuters) - Donald Trump and his attorney general were sued on Thursday by retail investors in two social media rivals of TikTok seeking to reverse the U.S. president's approval of a deal by the company's Chinese owner ByteDance to form a majority American-owned joint venture.
The lawsuit, the first legal challenge to the deal, argues that Trump's approval last year violated requirements set out in a 2024 divestiture law. Two California residents who hold shares in Alphabet GOOGL.O and Meta Platforms META.O sued, backed by a group called the Public Integrity Project.
The lawsuit, which also names U.S. Attorney General Pam Bondi, aims to require a renegotiation of the deal "that doesn't put (Trump) administration allies in a position to censor political content on one of the world's most popular media platforms."
The lawsuit could shed light on the joint venture, which is key to TikTok's survival in the United States and has faced criticism from some lawmakers.
The suit does not seek to force a U.S. ban on TikTok, which is used by 200 million Americans, said Brendan Ballou, a lawyer representing the plaintiffs.
A law passed by Congress in April 2024 required ByteDance to sell its U.S. assets by a January 2025 deadline or face a ban or potentially hundreds of billions of dollars in fines. Trump, a Republican who began his second term in office a day after that deadline, opted not to enforce the law, and Bondi told companies they would face no liability for continuing to allow TikTok use.
"The president is obviously violating the law," Ballou told Reuters.
Supporters of the law, which was signed by Democratic former President Joe Biden, had cited national security concerns over China's government obtaining data on the millions of U.S. users of the popular short-video app.
The Public Integrity Project includes Democratic former U.S. Senator Russ Feingold.
The Justice Department declined to comment on the lawsuit. The White House and TikTok did not immediately respond to requests for comment.
ByteDance said TikTok USDS Joint Venture LLC, which was finalized in January and is 80% owned by non-Chinese investors, would protect U.S. user data, apps and algorithms through data privacy and cybersecurity measures. It disclosed few details about the divestiture or the financial arrangements.
"Under the announced deal, ByteDance would still control all the essential elements of TikTok. Such a deal would subvert the very purpose of the TikTok Law, as ByteDance could continue to push Chinese propaganda and censor the content it does not like," the lawsuit stated.
The joint venture deal was a milestone for the social media firm after years of battles that began in August 2020, when Trump unsuccessfully tried to ban the app over national security concerns. Trump last year declared the deal met the terms of the divestiture law.
(Reporting by David Shepardson and Andrew Goudsward; Editing by Will Dunham, Chizu Nomiyama and Franklin Paul)
((David.Shepardson@thomsonreuters.com; 2028988324;))