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TikTok and ByteDance’s proposed $400 million settlement with the U.S. Justice Department ran into a serious obstacle Friday after a federal judge indicated that he was inclined to reject part of the agreement.

TikTok and its Chinese parent company agreed in August to resolve allegations that the short video application violated U.S. laws protecting children’s online privacy. The agreement divides the proposed payment into two parts.

Under the deal, TikTok agreed to pay $300 million immediately. The company would pay another $100 million if a court terminated a 2019 consent decree that the Federal Trade Commission imposed on Musical.ly, TikTok’s predecessor.

U.S. District Judge George H. Wu in Los Angeles signaled that he was inclined to reject the request to terminate that decree. He scheduled a hearing for Monday, leaving the disputed portion of the settlement facing further judicial scrutiny.

Wu said the court lacked enough detail to approve the requested termination. Without further information, the court “cannot determine that it constitutes a durable remedy or that termination is suitably tailored to the asserted change in circumstance,” he said.

The judge’s tentative position does not amount to a final ruling, but it creates a hurdle for the proposed agreement. The additional $100 million payment is tied directly to a court ending the existing consent decree.

That decree dates to a 2019 Federal Trade Commission action involving Musical.ly, which was later folded into TikTok. The FTC alleged that Musical.ly knew young children were using its application but failed to obtain parental consent before gathering their information.

According to the FTC, the information collected included names, email addresses and other personal details. Musical.ly paid a $5.7 million fine to settle those allegations.

The consent decree requires TikTok to maintain certain reporting and records obligations through 2029. TikTok and ByteDance are now seeking to end those requirements as part of the broader proposed resolution with the Justice Department.

The $400 million settlement stems from a Justice Department lawsuit filed in 2024. That lawsuit accused TikTok and ByteDance of failing to protect children’s privacy and illegally collecting their personal information.

The companies were accused of violating a law that requires online services directed at children to obtain parental consent before collecting information from users under 13. The case placed the companies’ treatment of younger users at the center of the government’s claims.

The government said TikTok had undergone significant changes since the lawsuit was filed. Those changes involved its ownership structure, management, compliance functions and privacy practices.

In January, ByteDance agreed to establish a joint venture with majority American ownership. The venture was intended to safeguard U.S. user data and avert a U.S. ban on an application used by more than 200 million Americans.

The TikTok U.S. joint venture addressed protections for younger users in a court filing. It said all users must enter their date of birth to use the site.

The joint venture also said it had developed sophisticated age moderation systems. Those systems are designed to identify children under 13 who misrepresented their age when seeking access.

Wu’s concern focuses on whether ending the 2019 decree would provide a durable remedy and whether termination is properly tailored to the changes cited by the government. His tentative rejection leaves that question unresolved before Monday’s scheduled hearing.

TikTok and the Justice Department did not immediately respond to requests for comment on Saturday. The hearing is set to address a provision carrying both financial consequences and continuing obligations for TikTok through 2029.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.