TikTok and its Chinese parent ByteDance have hit a setback in their proposed $400 million settlement with the U.S. Justice Department after a federal judge indicated he would reject a key part of the agreement involving a long-running privacy consent decree.

U.S. District Judge George H. Wu in Los Angeles said Friday that he was inclined to reject the companies’ request to terminate a 2019 consent decree imposed on TikTok’s predecessor, Musical.ly. He scheduled a hearing for Monday to consider the issue.

Wu said that, based on the information currently before the court, he could not determine that ending the decree would provide a “durable remedy” or that the proposed termination was appropriately tailored to the changes cited by the government.

The ruling does not, on its face, reject the entire $400 million settlement. But it puts a significant component of the agreement in doubt and could complicate TikTok’s effort to resolve allegations that it mishandled children’s personal information.

Under the proposed settlement reached in August, TikTok agreed to pay $300 million immediately and another $100 million if the court terminated the 2019 consent decree.

The decree dates back to Musical.ly, the short-video platform that was later folded into TikTok. In 2019, the Federal Trade Commission alleged that Musical.ly knew children under 13 were using the service but failed to obtain parental consent before collecting their names, email addresses, and other personal information.

Musical.ly paid $5.7 million to settle those allegations. The resulting consent decree imposed reporting and record-keeping requirements that remain in effect through 2029.

The latest dispute shows why the decree remains important to the Justice Department’s case. Terminating it would have provided TikTok with a way to close out a regulatory obligation that predates the current ownership and operating structure of its U.S. business.

The $400 million settlement itself stems from a Justice Department lawsuit filed in 2024. The government accused TikTok and ByteDance of violating U.S. children’s online privacy laws by collecting personal information from users under 13 without the required parental consent.

The government has argued that TikTok has undergone substantial changes since the lawsuit was filed, including changes to its ownership structure, management, compliance operations, and privacy practices. Those changes form part of the rationale for seeking an end to the older consent decree.

But Wu’s tentative position suggests that the court wants more evidence that those changes are sufficient to replace the protections and oversight contained in the existing order.

TikTok’s Broader U.S. Restructuring

The privacy case is unfolding alongside a much larger effort by ByteDance to restructure TikTok’s U.S. operations and address Washington’s concerns over the platform’s ownership and handling of American user data.

In January, ByteDance agreed to establish a majority American-owned joint venture intended to safeguard U.S. user data and help avert a potential U.S. ban. TikTok’s U.S. business has more than 200 million American users.

The joint venture has pointed to new safeguards designed to prevent children from accessing the platform. In a court filing, it said all users are required to provide their date of birth and that it has developed age-moderation systems designed to identify users under 13 who misrepresent their age.

Those measures are relevant to the Justice Department’s argument that TikTok’s privacy practices have changed significantly since the original allegations.

The judge’s response, however, indicates that the court may require a clearer connection between those changes and the proposed termination of the 2019 decree. That creates an unusual situation for TikTok. The company is attempting to resolve a new federal privacy case while simultaneously seeking to remove an older regulatory obligation that remains in force for several more years.

The settlement would have, for the Justice Department, provided a financial penalty and a resolution to the litigation while allowing TikTok to operate under its newer compliance framework. For TikTok, ending the consent decree would remove an additional layer of federal oversight inherited from Musical.ly.

The court’s decision could therefore determine whether the proposed settlement can proceed in its current form or whether the parties will need to renegotiate the arrangement.

The Monday hearing is expected to provide more clarity on whether the judge’s concerns can be addressed without reopening the broader settlement. Until then, the $400 million agreement remains subject to a significant legal hurdle, with the fate of the 2019 consent decree at the center of the dispute.

Volkswagen has warned of up to €10 billion ($11.5 billion) in one-off costs, most of them linked to struggling sports car unit Porsche, deepening a crisis at the world’s second-largest automaker and underscoring the growing pressure on Europe’s industrial giants from a rapidly changing global market.

The profit warning comes just two weeks after Volkswagen agreed to a sweeping transformation deal with shareholders that includes another 50,000 job cuts, a simplification of the group’s structure and the possibility of closing plants. The latest charges add another layer of pressure to a restructuring already described as the biggest in the company’s history.

Porsche is at the center of the latest deterioration. The luxury sports car brand has been hit by US tariffs and weakening demand for foreign luxury vehicles in China, creating a difficult combination for a business whose profitability has already deteriorated sharply. Porsche posted a profit margin of just 1.1% last year.

Volkswagen said about €6 billion of the impairment charges were tied to new mid-term assumptions for Porsche, in which it owns a 75% stake. The revised assumptions reflect lower expectations for the business as it reduces its dealership network in China and confronts weaker demand in one of its most important markets.

The warning underlines the scale of Volkswagen’s exposure to the two markets that have historically been critical to its global business. The automaker has been squeezed simultaneously by US import tariffs and a prolonged deterioration in China, where it lost its position as the country’s top-selling automaker in 2024.

“We have no time to lose,” Volkswagen finance chief Arno Antlitz said in an internal memo seen by Reuters, pointing to a 20% contraction in China, increasing competition from Asian rivals in Europe and rising sales of less profitable electric vehicles.

“There is no sign of consolidation,” Antlitz said of the Chinese market. “We cannot escape this trend.”

The deterioration has already been reflected in Volkswagen’s financial expectations. The group now expects its operating profit margin to be no higher than 1% in 2026, a dramatic reduction from its previous guidance of between 4.0% and 5.5%. Analysts had been expecting a margin of about 4.1%.

Volkswagen shares closed 5.6% lower on Friday, while Porsche shares fell 3.3%. Porsche SE, Volkswagen’s largest shareholder, also reduced its outlook, sending its shares down 4.9%.

China and EV Transition Squeeze Volkswagen

The latest warning exposes a difficult structural problem for Volkswagen. The company is being forced to contend with a weaker Chinese market at the same time as the global auto industry undergoes a costly transition toward battery-electric vehicles.

Volkswagen’s scale has historically provided a significant advantage, with its portfolio spanning mass-market and premium brands including Volkswagen passenger cars, Audi, Skoda and Seat. But the same breadth also leaves the group exposed to weakening demand across multiple segments and to the heavy investment required to adapt its product range.

China represents the most immediate pressure point. Volkswagen’s warning that there is “no sign of consolidation” in the market suggests that the company does not expect the competitive environment to improve quickly. Domestic Chinese manufacturers have expanded aggressively, while the shift toward electric vehicles has altered the competitive dynamics that previously favored established global automakers.

The company’s warning also points to a second problem: even where Volkswagen succeeds in increasing electric-vehicle sales, those vehicles can be less profitable than the models they are replacing. That means a faster shift in consumer demand toward battery-electric cars can increase pressure on margins before the company has fully adjusted its cost base and product mix.

Volkswagen said the “further deterioration in the market environment, especially in China” and an accelerated shift in demand toward battery-electric vehicles would result in lower expectations for its Audi and Volkswagen passenger-car brands.

The Porsche impairment is therefore more than an isolated problem at a luxury subsidiary. It forms part of a broader reassessment of the group’s earnings potential as Volkswagen confronts simultaneous changes in consumer demand, technology, trade policy and international competition.

The combination is particularly damaging for Porsche because its premium positioning makes it highly exposed to China’s luxury market while its US business faces the additional burden of tariffs. For Volkswagen’s wider group, the problem is broader: the company must reduce costs, restructure operations and regain competitiveness at a time when two of its most important overseas markets are becoming harder to navigate.