TikTok Gears Up for Legal Showdown Over U.S. Law

Written by Camilla Jessen

Apr.26 - 2024 10:49 AM CET

Technology
Photo: WESTOCK PRODUCTION / Shutterstock.com
Photo: WESTOCK PRODUCTION / Shutterstock.com
TikTok is gearing up for a legal fight against a U.S. law that would force the social media platform to break ties with its China-based parent company.

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TikTok is gearing up for a legal battle against a U.S. law that would force the popular social media platform to break ties with its China-based parent company. This move is almost certainly backed by Chinese authorities, signaling the intensifying U.S.-China rivalry and its impact on one of America's most popular apps among young people.

Beijing has urged TikTok to resist what it has called a "robbers' act" by U.S. lawmakers seeking to "snatch from others all the good things that they have."

If a legal challenge fails, observers say Chinese authorities are unlikely to permit a sale, which would be perceived as a capitulation to Washington's demands.

Alex Capri, a senior lecturer at the National University of Singapore and research fellow at the Hinrich Foundation, noted that Beijing might view U.S. action against TikTok as setting a dangerous precedent.

“If Beijing capitulates to the U.S., where does it end?” he asked AP news.

TikTok's Legal Strategy

In response to the new U.S. law, ByteDance, TikTok's parent company, released a statement on Toutiao—a Chinese news app it owns—stating it has no plans to sell TikTok. This came after media reports suggested ByteDance was considering scenarios for selling TikTok's U.S. business.

The legislation, recently signed by U.S. President Joe Biden, would require ByteDance to divest its stakes within a year to avoid a ban. The law allows Washington to potentially target other China-related apps, including the popular e-commerce platform Temu, and might encourage U.S. allies to follow suit.

TikTok has vowed to challenge the law, claiming it infringes on the free speech rights of its users, most of whom use the app for entertainment. The company stated, "We believe the facts and the law are clearly on our side, and we will ultimately prevail."

Intensifying U.S.-China Tensions

The TikTok dispute has heightened tensions between the U.S. and China, with both sides emphasizing their commitment to economic and national security.

U.S. lawmakers are concerned that Chinese ownership of TikTok could allow Beijing to exert undue influence in the U.S., particularly over young users. The new law is part of a broader pattern of Washington's efforts to curb Chinese influence through bans, export controls, and forced divestitures, provoking protests from Beijing, which accuses the U.S. of economic coercion.

The U.S. has forced other Chinese companies to divest before. In 2020, Beijing Kunlun, a Chinese mobile video game company, agreed to sell the gay dating app Grindr after receiving a federal order. However, TikTok, which ByteDance created exclusively for overseas markets, represents a high-profile case that Beijing does not want to lose.

A High-Stakes Decision for Beijing

National pride could "take precedence over the financial interests of ByteDance investors," noted Gabriel Wildau, managing director at Teneo. A legal challenge could take years to resolve, and Beijing appears to be betting on a legal victory.

If TikTok does not prevail in court, President Xi Jinping would ultimately decide whether to permit or block a sale.

According to Dominic Chiu, an analyst with Eurasia Group, it's unlikely Xi has made a final decision yet, and Beijing may not rush, given the complexity of the case. Sun Yun, director of the China program at the Stimson Center, said Beijing may opt to wait and see how the situation develops.

Challenges of a TikTok Sale

If forced to sell, disentangling TikTok's U.S. operations from its global structure could be complex. The price tag for TikTok's U.S. business—estimated to be quite high—would limit the pool of potential buyers. ByteDance, valued at $220 billion, might struggle to find investors able to afford the purchase.

Additionally, the TikTok algorithm, which drives the platform's success, could be a sticking point. ByteDance would be barred from controlling the algorithm of a U.S. spinoff of TikTok, and Chinese authorities might block its sale under revised export regulations. This would likely require a new U.S.-based algorithm, but replicating TikTok's complex technology would be challenging.

Robin Burke, a professor of information science at the University of Colorado Boulder, noted that some aspects of the algorithm might be replicated by industry insiders, but TikTok's extensive data and experience could be difficult to duplicate, at least in the short term.

As the legal battle between TikTok and the U.S. government unfolds, the outcome will not only shape the future of TikTok but could also influence broader U.S.-China relations and how technology companies operate on the global stage.

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