A federal appeals court in the United States upheld a law on Friday mandating that ByteDance, the Chinese company that owns the widely-used TikTok app, must divest its U.S. operations by early next year or face a potential ban.
This ruling represents a significant victory for the Justice Department and critics of the Chinese-owned app, while dealing a heavy blow to ByteDance. The decision raises the likelihood of an extraordinary ban on TikTok, an application utilized by 170 million Americans, in just six weeks.
TikTok has announced its intention to appeal the decision to the Supreme Court.
The appeals court highlighted bipartisan support for the law, noting it emerged from collaboration between Republicans and Democrats across two presidential administrations. The court characterized the law as part of a larger strategy to address a well-documented national security concern posed by the People’s Republic of China (PRC).
The Justice Department contends that TikTok’s Chinese ownership presents a risk due to its access to vast amounts of American users’ personal data, suggesting that the Chinese government could manipulate the information provided to users through the app.
Attorney General Merrick Garland described the ruling as “an important step in blocking the Chinese government from weaponizing TikTok.”
In contrast, the Chinese Embassy in Washington criticized the law, labeling it “a blatant act of commercial robbery” and cautioning the U.S. to handle the situation prudently to maintain mutual trust and foster constructive bilateral relations.
This ruling arrives amid escalating trade tensions between the two largest global economies, following the Biden administration’s introduction of new restrictions on China’s semiconductor industry, to which China retaliated by banning exports of crucial materials like gallium and germanium to the U.S.
Judges Sri Srinivasan, Neomi Rao, and Douglas Ginsburg from the U.S. appeals court dismissed challenges to the law raised by TikTok and its users. The legislation allows ByteDance until January 19 to either sell or divest its U.S. assets associated with TikTok or face a ban.
Free Speech
TikTok CEO Shou Zi Chew expressed disappointment in the court’s ruling, conveying to staff in an email that the company would continue its efforts to safeguard free speech on the platform.
Advocates for free speech quickly condemned the ruling. The American Civil Liberties Union stated that banning TikTok infringes upon the First Amendment rights of millions of users who utilize the app for expression and global communication.
The court’s analysis indicated that China’s ties to ByteDance posed a threat to American speech through TikTok, with the potential to manipulate public discourse. The opinion emphasized that such actions would conflict with fundamental free speech principles inherent in the First Amendment, which prevents domestic government control over social media platforms in the U.S.
The decision now places TikTok’s fate in the hands of President Biden, who has the option to grant a 90-day extension on the divestiture deadline, and subsequently President-elect Donald Trump, who will assume office on January 20. It remains uncertain whether ByteDance could demonstrate sufficient progress toward divestiture to warrant an extension or whether the Chinese government would approve any sale.
Trump previously attempted to ban TikTok during his first term in 2020 and indicated before the November presidential election that he would not allow such a ban this time around.
Friday’s ruling reinforces a law that grants the U.S. government extensive authority to prohibit foreign-owned apps that raise data collection concerns. This could pave the way for future actions against various other foreign-owned applications. Notably, Trump’s 2020 attempt to ban Tencent-owned WeChat was also thwarted by the courts.
TikTok Ban Looms
Should TikTok be banned, advertisers may seek alternative social media platforms for their campaigns. Following the ruling, shares of Meta Platforms surged, reaching an intraday high, with a closing increase of 2.4%. Alphabet, parent company of Google, which competes against TikTok via its YouTube platform, also saw a 1.25% rise in its stock price.
ByteDance, with backing from investors including Sequoia Capital and KKR & Co, was valued at $268 billion in December 2023 during a stock buyback offer of approximately $5 billion.
The law prohibits app stores such as Apple’s App Store and Google Play from distributing TikTok and prevents hosting services from supporting the app unless ByteDance divests its U.S. interests by the stipulated deadline.
Apple has not responded to requests for commentary, while Google declined to provide one.
Srinivasan, in a concurring opinion, pointed out the extensive impact of the ruling, highlighting that 170 million Americans rely on TikTok for creative expression and social interaction. He affirmed that due to the platform’s broad reach, both Congress and several Presidents have determined that removing it from Chinese control is vital for national security.
© Thomson Reuters 2024
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
