If the gov 1) shows that it's willing to take extreme action that is outside the bounds of the law or at the least accepted practice, and 2) makes it clear that

If the gov 1) shows that it's willing to take extreme action that is outside the bounds of the law or at the least accepted practice, and 2) makes it clear that it's not afraid of getting sued and is even willing to ignore the courts, then 3) threats of the type described in the article are very effective because you have to assume that the government will take things to the next level if you don't comply, regardless of the legality of their threats. That is how authoritarianism works. It's been very effective in China where companies and institutions are cowed into compliance. For example, censoring by social media companies. Companies self-sensor their users' content so the government doesn't have to. Why? Because if they don't, they know they will get in trouble in some way, and it may on the surface be completely unrelated (like these veiled threats about tax status).