TikTok: Has Time Run Out?

Further to our previous post.

President Biden has now signed off on the Protecting Americans From Foreign Adversary Controlled Applications Act, which effectively criminalizes the distribution, maintenance or updating of a foreign adversary controlled application in the US. According to The Hill, the now mandated sale of the company is “poised to be one of the most significant and contentious technology transactions in recent years”. Analysts estimate that the U.S. operations of TikTok could demand a price in the tens of billions of dollars.

TikTok essentially has two options. First, it could comply with the law and sell to a non-Chinese owner within the next 9 months. This avenue poses serious challenges. Not only may ByteDance Ltd. refuse to sell the app, the Chinese government has said that it would not approve a sale of the algorithm (signalling that Beijing’s priority is not the company’s financial prosperity or global expansion). Furthermore, antitrust scrutiny may take many of the American tech giants (such as Google and Meta, formerly Facebook) out of the buyers race. If TikTok fails to sell within the stipulated timeframe, then app stores will be forced to ban the app in the U.S.

Second, TikTok could file a lawsuit challenging the legislation. TikTok has vowed to sue and will likely seek a preliminary injunction from the court. Following the enactment of the bill, TikTok CEO, Shou Chew, called it “a ban on TikTok and a ban on you and your voice”. The case is therefore expected to focus on alleged violations of the company’s First Amendment rights and those of its 170 million users.

TikTok’s legal challenge will not be met without a fight. The government is likely to respond with national security claims, similar to those cited as the legislation progressed through Congress.

While the question of TikTok’s longevity in the Western world is uncertain, its CEO remains confident. Chew publicly assured its user base that they “aren’t going anywhere”, that “the facts and the Constitution are on [their] side,” and they “expect to prevail again”. Time will tell.