US Law and TikTok: Countdown to a Ban or Sale? ⏰

Hi there! 👋

TikTok, launched in 2016, has risen to become one of the most popular social media apps globally. It is known for its engaging and addictive videos tailored to users through its personal algorithm. Yet global concerns around the app’s data privacy and security are mounting. 

While past US attempts to ban the short video-sharing social media app have failed, a bill requiring TikTok’s Chinese parent owner Byte Dance to divest the app’s US assets to American investors has been voted through both houses in Congress (House of Representatives and the Senate), and signed into law by President Joe Biden. As a result, ByteDance will have nine months to initiate this sale or it will be phased out of app stores and website hosts , primarily Google and Apple, and unable to be updated and downloaded.

Legal Challenges and Security👩‍⚖️🔓

Alongside the app being banned from India entirely and government-issued phones in the UK, New Zealand and the US, the creation of this bill stemmed from US government authorities and their concerns about the app’s user data being accessed by the Chinese government. This is because China has the authority to ask companies that operate in the country for data access, and Byte Dance is Chinese-owned. However, TikTok’s  Singaporean CEO Shou Chew insists that TikTok is ‘not an agent of China’  and denies any attempts by China to retrieve its data. In fact, the social media platform does not actually operate in mainland China, with its headquarters also based in Singapore and Los Angeles, and 60% of it being owned by international investors. 

Although US government authorities argue that this bill is necessary on the grounds of national security, TikTok is reported to appeal this on the basis that it violates users’ free speech rights, linking it to the breach of the first amendment in the US Constitution protecting this fundamental freedom. Previously in 2020 when former US president Donald Trump tried to ban the app, the platform secured a preliminary injunction, which could reoccur. Furthermore, the American Civil Liberties Union are concerned that this ban could lead to tighter controls over social media platforms globally.

Economic and Social Implications 📈

As well as the lengthy legal process involved, there is also the question as to which investors will buy the US assets, estimated to cost between $40-50 billion and which the Chinese government is involved in the approval and process of this. Potential purchasers include Steve Mnuchin (former Treasury Secretary under Trump and private equity investor), Kevin O’Leary (venture capitalist), and the former CEO of Activision Blizzard and Rumble Video. When Trump previously tried to impose a similar bill, Microsoft, Walmart and Oracle were involved in a deal. It is also important to note that the deadline to divest is towards the inauguration of the next US president, potentially leaving some room for alterations or amendments. Thus, if TikTok does not succeed in its appeal, the app will still not be banned for a couple of years. 

However, this still raises concerns for the future of the 8,000 US employees of TikTok, as well as content creators and approximately 7 million US small businesses which heavily rely on the platform for exposure and revenue, especially when aiming to reach younger audiences. The Oxford Internet Institute reports over $1.1 billion in gross merchandise revenue (GMR) from the ‘Tik Tok Shop’ e-commerce platform. 

Additionally, with the US making up the highest percentage of TikTok users globally as of January 2024, compromising between 150- 170 million users, the type of content available and trends emerging on TikTok will dramatically shift. It is likely to move towards competing social media platforms such as Instagram with its Reel feature and YouTube with its ‘shorts’ feature’, with previous Ad spend on TikTok directed towards Facebook too. 

Despite the uncertainties around which direction this legal battle could take, the shifting political, and regulatory frameworks andas well as the tensions around TikTok and potentially other social media platforms highlight how businesses at varying scales must diverge from reliance on singular platforms to generate revenue and grow their presence.