On Tuesday,TikTok launched a lawsuit challenging the constitutionality of that direct a sale or ban of the social media app’s US business by January 19 next year. That is,coincidentally,or not,the day before the inauguration of whoever wins the presidency in the US elections in November.
The lawsuit,which seeks a court order preventing enforcement of the bipartisan legislation,argues that the law violates the First Amendment,or the free speech rights of its 170 million US users.
The new US law directs the Chinese owners of TikTok to sell the company or face a ban in the US.AP
“Banning TikTok is so obviously unconstitutional,in fact,that even the Act’s sponsors recognised that reality and therefore have tried mightily to depict the law as not a ban at all but merely a regulation of TikTok’s ownership,” the filing says.
TikTok made it clear that the surrender option – selling its US business – isn’t an option,with a forced sale not commercially,technologically or legally possible. Thus,given the remaining options of fleeing – closing down the US business – or fighting it in the courts,it has elected to fight.
The bipartisan support for the law ordering a sale or ban on TikTok in the US was predicated on a perceived threat to US national security flowing from TikTok’s collection of vast amounts of user data. It tracks everything from users’ locations to their contacts,browsing and search histories and even the content of their messages.
Beyond the privacy issues,Congress was concerned that TikTok could be used to influence opinion and policy in the US or to spread disinformation. Chinese law enables Beijing to direct ByteDance to give it access to its users’ data.
Before the legislation passed through Congress,the House Committee on Energy and Commerce,which approved the bill unanimously,received classified briefings on the security risks posed by TikTok. It’s unclear whether those risks were potential or actual,but the TikTok litigation might provide more in-depth insights into the substance of US national security concerns.
The US government and governments in Australia,New Zealand,Canada,the UK and Europe have directed their officials not to download the app on their devices over similar concerns. India has a blanket ban on all Chinese-controlled apps.
China,of course,has itself banned some foreign social media companies from operating within China. Only last week it ordered Apple to remove Signal,Telegram and WhatsApp from its Chinese store. Until a week or so ago,Chinese-built Tesla cars were banned from entering or being close to government properties because of their capacity to collect data.
Popular app TikTok is suing the US government to block a potential ban.
The US legislation isn’t the first attempt to force ByteDance to sell its business or be banned in the US.
Donald Trump,in 2020,signed an executive order to that effect,but it was blocked in the courts.
Trump now opposes a ban because he says it would benefit “an enemy of the people” – Facebook,which banned him for two years after the January 6 conflict at the US Capitol in 2021,and which was heavily involved in efforts to boost voting at the 2020 elections.
He,however,didn’t have the benefit of legislation tailored to its purpose.
The US Justice Department was heavily involved in drawing up the new law,which purports to regulate TikTok’s ownership rather than its users or their content. Under new ownership and distanced from China,TikTok could continue to operate,with users able to post content as freely as they do today.
“If Congress can do this,it can circumvent the First Amendment by invoking national security and ordering the publisher of any individual newspaper or website to sell to avoid being shut down,” TikTok claims.
“And for TikTok,any such divestiture would disconnect Americans from the rest of the global community on a platform devoted to shared content,an outcome fundamentally at odds with the constitution’s commitment to both free speech and individual liberty.”
TikTok had,in response to the Trump administration’s actions,tried to quarantine its US business from the wider ByteDance group.
It has spent,it says,more than $US200 million ($304 million) to host the US data in a dedicated facility in Texas,with servers owned and managed by Oracle and with access to the source code it uses overseen by a government-approved committee.
Self-evidently,that wasn’t sufficient to reassure US legislators.
Nor was the fact that ByteDance is nearly 60 per cent owned by foreign investors. Its founder,Zhang Yiming,owns 20 per cent (but has super-voting shares) and its employees own about 20 per cent.
While ByteDance has made it clear that it has no intention – it argues no practical ability – to sell TikTok’s US business,that hasn’t stopped prospective buyers from running their slide rules over it and,indeed,ByteDance’s entire international business.
The US business has been valued at between $US20 billion and $US50 billion,with the larger international business priced at more than $US100 billion. Various investor groups and big tech companies,including a group headed by Trump’s former Treasury Secretary Steve Mnuchin have been considering how and how much to bid for either the US business or the larger international business.
With China having already said that it won’t allow ByteDance to sell the algorithm that is the most critical element of the technology underpinning the platform – it decides what individual users should be shown based on the data it has collected from their devices and usage of its platform – even if ByteDance was prepared to sell the business,it would be difficult to operate it as it has operated and,as a consequence,hard to value.
TikTok says its platform has been built on millions of lines of software code,developed by thousands of engineers,over multiple years. Without access to the existing algorithm,that can’t be replicated by January 19.
If TikTok doesn’t prevail in the courts – the case is likely to end up in the US Supreme Court – it may have to shut down a business that,while containing only 170 million of its billion-plus users worldwide,has disproportionate economic significance to it because of the vast pools of advertising revenue available in the US.
TikTok is thought to have about $US9 billion of revenue in the US out of the $US22 billion or so it is estimated to generate worldwide. So,less than 17 per cent of its users are in the US,but 40 per cent of its revenues originate there,with a lot of upside.
There’s a precedent for what might happen if it is forced to simply quit the US.
When (after a border clash between Indian and Chinese troops) India banned TikTok and nearly 60 other Chinese apps in 2020,it delivered a huge boost to YouTube,Instagram and some locally-developed social media apps.
The same could be expected in the US if TikTok is forced to shut down,which explains why Trump,who regards the social media giants (other than X) and Facebook,in particular,as Democrat-friendly opponents went from advocating a ban when he was in office to opposing one as he seeks to regain the presidency.
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