League of Legends: A Lawyer on the Trump Executive Order and Tencent

PARIS, FRANCE - NOVEMBER 10: --- during 2019 League of Legends World Championship Finals at AccorHotels Arena on November 10, 2019 in Paris, France. (Photo by Michal Konkol/Riot Games)
PARIS, FRANCE - NOVEMBER 10: --- during 2019 League of Legends World Championship Finals at AccorHotels Arena on November 10, 2019 in Paris, France. (Photo by Michal Konkol/Riot Games) /

President Trump’s executive order probably won’t impact League of Legends directly, but it will certainly impact Tencent.

Last night, President Donald Trump issued an executive order (“EO”) that could have serious implications for Tencent and League of Legends. As a lawyer barred in the Commonwealth of Virginia and District of Columbia, I’ve taken the time to read through the EO in order to give my preliminary thoughts on what this order could mean for Riot Games, League of Legends, and other Tencent properties.

I’ll preface the discussion by noting that this article is meant purely for hypothetical discussion of general legal principles. By this article, I do not intend to and am not providing legal advice to any persons or entities affected by this Executive Order and anyone wishing to take legal action pursuant to said order should consult with their own attorney. With those disclaimers out of the way, here are the key takeaways from the Executive Order.

1. This Probably Doesn’t Affect League of Legends

We’ll get to the biggest question right off the bat: does this affect League of Legends and Riot Games, in which Tencent is a majority owner. From reading the EO, the answer is probably not.

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This EO is meant to target Tencent for its stake in WeChat, a messaging system that “reportedly has over one billion users worldwide, including users in the United States.” There have been allegations and research showing that a Chinese database exists which contains “billions of WeChat messages sent from users in not only China but also the United States, Taiwan, South Korea, and Australia.” Thus, this EO is designed to protect the United States’ national security by protecting the data information of its citizens.

So, although the EO does explicitly ban any transaction with Tencent Holdings Ltd., the actual phrasing of the order is that it prohibits “any transaction that is related to WeChat by any person” (emphasis added). I would expect that this means that Tencent can and will argue that any transactions related to Tencent’s holdings in other companies, including Riot Games, are not subject to this order.

2. It Could Affect League of Legends in Narrow Circumstances

Now, there is the caveat that additional transactions to any of Tencent’s subsidiaries (which would include Riot) identified by the Secretary of Commerce could also be banned. That could potentially apply to Riot, but there are a few key legal principles that could save them.

First, this clause is very likely in the EO to provide a way for the US to target subsidiaries that Tencent is using to funnel money to WeChat. So, for instance, if Coca-Cola wanted to advertise on WeChat, but now can’t, they could include some clause in a contract with Riot for additional monies paid to Tencent for purposes of marketing with respect to League of Legends in China and Tencent could put Coca-Cola ads for their League of Legends partnership in WeChat. In this case, the actual transaction itself isn’t related to WeChat but it is effectively circumventing the EO to accomplish the same goal (getting Coke ads on WeChat).

Therefore, there might (and again, this is all pure speculation on my part) be some contracts with advertisers partnering with League of Legends that include clauses relating to that partnership being advertised on WeChat. There are also, likely, direct advertising agreements between Riot and Tencent (advertising League of Legends on the app itself) that would be subject to this EO.

3. President Trump Can Do This

A big question/complaint I’ve seen is “how can Trump do this?” The short answer is, thanks to broad executive powers.

The US constitution provides the President powers to make executive orders that manage the operations of the federal government. This includes the operation of the various departments of the federal government. In this EO, President Trump specifically refers to the United States Department of Commerce, which has broad powers relating to trade.

Past Presidents have used EOs to enable to Department of Commerce to establish rules that increase the ability of adults with disabilities to obtain employment and creating equal employment opportunity in the federal government. Foreign trade issues fall under the ambit of the Department of Commerce’s powers, so issuing an EO that restricts the ability of American companies to do business with foreign entities would be permissible.

4. Riot Has 45 Days to Get Everything in Order

The final key piece of this EO is that it will not go into effect for 45 days. At that time, the Secretary of Commerce will also provide additional guidance as to which transactions involving subsidiaries of Tencent would be subject to this EO.

That means the lawyers at Riot are going to be hard at work reviewing and amending all relevant contracts with their parent company. In all likelihood, they will have to ensure that all advertising contracts either remain silent on (or ideally affirmatively disclaim against) advertising on WeChat. This would also apply to any contracts involving Riot’s advertising partners.

In addition, Riot can file a legal challenge against the EO, as Tik Tok has already threatened to do with regard to a similar EO issued by President Trump yesterday. The legal basis for such legal challenges are a bit dubious, as outlined above, but at the very least Riot can begin the process which would engage the federal government.

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In most cases, legal action serves as the start of a dialogue between the aggrieved party and the government. Most cases are resolved without ever going to court through negotiation, so it’s actually in Riot’s best interests to start the process so it can demonstrate how any contracts it has with Tencent are unrelated to WeChat. In an ideal world, this would convince the Secretary of Commerce to not include any of Riot’s current or prospective agreements from being subject to this EO.

As noted at the beginning of the article, however, it’s likely that most contracts involving Riot and Tencent will not be subject to this Executive Order (again, this is hypothetical speculation which could turn on the actual terms of any such contracts and this can change based on the further direction from the Secretary of Commerce in 45 days). Riot has plenty of time and resources to make sure that its finances will not be impacted by this ruling. Plus, they’ve got the new Psyops skins coming in (which look pretty sick) so I’m betting they won’t be hurting for cash.