TikTok CEO Shou Zi Chew testifies before a House Energy and Commerce Committee hearing titled “TikTok: How Congress Can Protect US Data Privacy and Protect Children from Online Harm,” as lawmakers consider scrutinizing the Chinese video-sharing app, on Capitol Hill in Washington, March 23, 2023.
Evelyn Hockstein | Reuters
TikTok’s future is more uncertain than ever after the social media company sued the US government on Tuesday over a law that would force Chinese parent ByteDance to sell the app or face a national ban.
Chairman Joe Biden signed legislation in April that gives ByteDance nine months to find a buyer for the popular short-form video app, and a three-month extension if the deal goes through. The Protecting Americans from Controlled Apps by Foreign Enemies Act, as it’s known, passed with bipartisan support in both houses of Congress.
TikTok supports that the bill violates the First Amendment and that divestiture is “simply not possible: not commercially, not technologically, not legally,” according to the company’s legal filing.
“For the first time in history, Congress enacted a law that subjects a single, named speech platform to a permanent, nationwide ban and prohibits every American from participating in a unique online community of more than 1 billion people worldwide,” the lawsuit states. he said.
US lawmakers have long argued that foreign ownership of TikTok poses national security risks. Former President Donald Trump tried to ban the platform through an executive order in 2020, paving the way for a possible ban. That effort failed, but the issue gained traction as concerns about China’s increased power in the world state intensified.
Before the law was passed, TikTok spent more than $2 billion on an initiative called “Project Texas” to better protect US user data from foreign influence. However, lawmakers continued to push to advance the legislation.
Whether TikTok is successful in its lawsuit, filed in the US Court of Appeals for the DC Circuit, depends largely on how the courts deal with the issue. Is it a First Amendment issue or a national security concern?
“One of those really tough issues”
The D.C. Circuit Court could agree to hear the case in an expedited time frame, meaning a comprehensive opinion could be issued before a sale is required, said Gus Hurwitz, senior partner and academic director of Center for Technology, Innovation & Competition at University of Pennsylvania Carey School of Law.
Hurwitz said TikTok and ByteDance will likely seek a stay of the law or a preliminary injunction in court, effectively putting the law on hold until a decision is made.
“If the court doesn’t put such a stay in place, I think that’s a very bad sign for TikTok and ByteDance,” Hurwitz told CNBC in an interview. “This is a proposition that the court believes the law has a very good chance of being upheld.”
TikTok could also file another lawsuit on behalf of its users, which Hurwitz said would strengthen the company’s First Amendment argument and, if the courts see it that way, would make it difficult for Congress to prevail.
“This is one of those really tough issues on both sides,” Hurwitz said.
Gautam Hans, associate clinical professor of law at Cornell Law School, said courts take issues of suppressing speech very seriously, but they also protect national security. He said the two priorities rarely conflict.
“These situations are relatively rare,” Hans said in an interview. “This law is, to my understanding, quite unprecedented.”
It’s also different from previous efforts to ban TikTok, as the bill has bipartisan support, which could sway the courts, Hance said. Regardless of what happens in district court, Hance said there’s a real chance the case could end up in the U.S. Supreme Court.
“I don’t think this case will be solved easily,” Hans said.
Weighing a sale
ByteDance could simplify the process and agree to divest TikTok so that its primary owner is outside of China. But the company has According to reports said he would rather shut down TikTok in the US than sell it. TikTok CEO Shou Chew said in a video on the app, “Make no mistake: This is a ban.”
Further complicating a potential sale is the issue of TikTok’s algorithm, which is the key piece of technology that allows the app to make recommendations to users. China would likely have to approve the transfer of the algorithm, a move experts don’t see happening.
“It’s like selling the house, but you take out all the windows and doors and who’s going to buy it?” said Hans.
However, there are some interested buyers.
Former Treasury Secretary Steven Mnuchin told CNBC’s David Faber on Tuesday that he is still “very interested” in buying or investing in TikTok. He said that even without the algorithm, the platform could probably be rebuilt within a year. But he said it would be a much tougher deal if TikTok spent six months of that time in litigation.
“The best outcome would be if they agreed to do a deal now and you would have a year to rebuild the technology, which I think would be a big effort, but it could be done,” Mnuchin said.
As of now, TikTok can continue to work. Hurwitz said the company shows little inclination to sell or cease operations in the U.S. until the last possible moment.
“It will be a while,” he said.
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