A federal appeals court in the United States upheld a law on Friday mandating that ByteDance, the Chinese company behind TikTok, must divest its ownership of the widely-used video app in the U.S. by early next year or risk a ban.
This ruling serves as a significant victory for the Justice Department and critics of the Chinese-owned platform, posing a considerable challenge to ByteDance. The outcome intensifies the possibility of a historic ban on TikTok, which has around 170 million users in the United States, within the next six weeks.
TikTok has confirmed plans to appeal the decision to the Supreme Court.
The appeals court highlighted that the law’s support came from bipartisan cooperation among various lawmakers and two presidential administrations, stating it is part of a broader strategy to mitigate what it describes as a substantiated national security threat presented by the People’s Republic of China (PRC).
The Justice Department has expressed concerns that, under its current ownership, TikTok poses risks due to its access to extensive personal data from American users. Officials assert that the Chinese government could exploit this data to influence and manipulate the information Americans are exposed to through the app.
Attorney General Merrick Garland called the court’s ruling “an important step in blocking the Chinese government from weaponizing TikTok.” However, the Chinese Embassy in Washington characterized the law as “a blatant act of commercial robbery,” urging the U.S. to proceed with caution to avoid undermining trust and relations between the two nations.
This legal ruling surfaces amid escalated trade tensions between the U.S. and China, following new restrictions imposed by President Joe Biden’s administration on China’s semiconductor industry, to which Beijing responded with a ban on certain exports to the United States.
The panel of Judges Sri Srinivasan, Neomi Rao, and Douglas Ginsburg dismissed legal challenges made by TikTok and its users regarding the divestment law, which requires ByteDance to sell TikTok’s American operations by January 19 or face a ban.
Free Speech Concerns
“While today’s news is disappointing, we will remain dedicated to our fight for free speech on our platform,” TikTok CEO Shou Zi Chew conveyed in an email to staff that was later seen by Reuters.
Free speech advocates have voiced concerns over the ruling, with the American Civil Liberties Union stating that banning TikTok infringes upon the First Amendment rights of millions who utilize the platform for self-expression and communication.
The court noted that China’s connection with TikTok through ByteDance poses a risk of distorting speech and manipulating public discourse in the U.S. Such actions are deemed contrary to the principles of free speech, with the First Amendment preventing the U.S. government from exerting similar control over a domestic social media platform.
The outcome places TikTok’s future in the hands of President Biden, who must decide whether to grant a 90-day extension for the January 19 divestment deadline. After Biden, President-elect Donald Trump will take office on January 20, but it remains uncertain if ByteDance would be able to demonstrate substantial progress required to justify such an extension, or if the Chinese government would approve any potential sale.
Trump, who attempted to enact a TikTok ban during his first term in 2020, stated prior to the November presidential elections that he would oppose any TikTok prohibition.
Friday’s ruling reaffirms the U.S. government’s authority to restrict other foreign-owned applications that may raise concerns regarding the collection of American users’ data, leading to potential further actions against additional foreign apps. The legal challenges facing Trump’s prior efforts to ban Tencent-owned WeChat also illustrate the complexities involved.
Potential Impact on Advertising
If TikTok were to be banned, advertisers on the platform would need to seek alternative social media channels for their ads. Following the court’s decision, shares of Meta Platforms surged, closing 2.4% higher after reaching an intraday record, while Google parent Alphabet, in competition with TikTok via its YouTube platform, saw shares rise by 1.25%.
The court’s opinion, authored by Ginsburg, a Reagan appointee, alongside Rao, a Trump appointee, and Srinivasan, an Obama appointee, acknowledged that the ruling would precipitate TikTok’s ban unless Biden grants an extension.
ByteDance, with backing from major investors such as Sequoia Capital and KKR & Co, had a valuation of $268 billion in December 2023 when it proposed purchasing approximately $5 billion in shares from investors, according to reports.
The law in question prohibits app stores, including those operated by Apple and Google, from offering TikTok and restricts internet hosting services from supporting the platform unless ByteDance divests its U.S. assets by the determined deadline.
Google declined to comment on the matter, while Apple did not respond to requests for a statement.
In a concurring note, Srinivasan acknowledged the sweeping implications of the decision, stating that “170 million Americans use TikTok to create and view all sorts of free expression and engage with one another and the world. Yet, because of the platform’s significant reach, Congress and multiple Presidents determined that divesting it from (China’s) control is essential to protect our national security.”
© Thomson Reuters 2024
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
