DPC to impose ‘preliminary range of fines’ on TikTok over children’s data

Pretax profits at Irish arm of social media giant rise to $18m

The Irish Data Protection Commission (DPC) has indicated “a preliminary range of fines” to be imposed on the Irish arm of TikTok concerning its investigation into how the social media giant processes children’s data.

The findings of a draft decision by the DPC is disclosed in new accounts for TikTok Technology Ltd which show that pretax profits at the Dublin-based company last year increased 18-fold to $18 million (€17.85 million) as the business ramped up its operations here.

TikTok Technology Ltd recorded an almost fivefold jump in revenues to $203 million, from $45.83 million. The business provides services related to content moderation, data controlling of TikTok in Europe, and sales, marketing and routine support to other TikTok entities.

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In September of this year, the DPC submitted a draft decision arising from a large-scale inquiry into TikTok Technology Limited to other supervisory authorities across the European Union. The inquiry, which began in September 2021, examined processing of the personal data of children by TikTok and its age verification practices between July 29th to December 31st, 2020.

Referring to the draft decision issued by the DPC, a note attached to the accounts concerning “contingent liabilities” states that the DPC has “indicated a preliminary range of fines”. The note states that “this decision is currently being considered by the other EU data protection regulators under the GDPR (General Data Protection Regulation) article 60 process”.

“In light of the draft decision, it is probable that potential losses related to this investigation may be incurred and may be challenged or appealed by the company,” the note said.

“However, the timing and the amount of the settlement outflow are still subject to uncertainties. It is impracticable for the company to estimate the potential financial impact, so no provision has been made.”

The note also refers to other regulator investigations and adds that “the provisions for fines arising on any of the above matters will be remunerated by the company’s parent under an intercompany service agreement, if any”.

Fines in this area can be substantial – in September, the DPC fined the owner of Instagram, Meta Platforms Ireland, €405 million arising from an inquiry concerning the processing of personal data relating to child users of Instagram.

The TikTok accounts show that numbers employed by the business last year jumped to 1,753 from 410. Staff costs multiplied to $128.7 million from $29.13 million.

The business has plans for further expansion here, with the accounts saying that in 2023 “the company expects to establish its European data centre operations in Ireland to store EEA & UK TikTok user data”.

In further consolidating its presence in Dublin, the accounts said the company entered a long-term lease agreement for office space in Dublin’s docklands for additional office space. The principal rent for the office is about $18 million per year and the company plans to move in 2023.

The firm generates all its revenues from the UK and the accounts said that “the company has performed in line with expectations”.

On the risks and uncertainties facing the company, the accounts noted that “privacy and security concerns related to TikTok platform could damage the business’s reputation and deter current and potential users for using the application”.

“Protecting the privacy and safety of TikTok’s users, and in particular younger users, is a top priority.”

The firm recorded net profits of $15.93 million after paying corporation tax of $2.66 million. Directors’ pay at the firm last year totalled $481,878.

Accumulated profits at the company at the end of last year totalled $16.23 million and cash funds totalled $12.22 million.

Gordon Deegan

Gordon Deegan

Gordon Deegan is a contributor to The Irish Times