Tiktok digging in to fight U.S. ban with 170M users at stake
Four years ago, when the Trump administration threatened to ban Tiktok in the U.S., its Chinese parent company, Bytedance Ltd., worked out a preliminary deal to sell the short video app’s business. Not this time.
Once again, the U.S. government is aiming to shut down Tiktok unless it’s divested from Beijing-based Bytedance. But the company has made clear it has no intention of selling. Indeed, Tiktok’s management vowed in an internal memo to staff “we will move to the courts for a legal challenge” if the bill winding its way through Congress is signed into law.
That sets the stage for a watershed legal battle between the U.S. government and the offspring of a $240 billion startup that’s come to define China’s growing technological muscle. The outcome could define the business landscape for Chinese companies like Tencent Holdings Ltd. and PDD Holdings Inc.’s Temu with growing U.S. ambitions. And it’s a test of how Beijing will respond to growing pressure on homegrown champions from Bytedance to Huawei Technologies Co. The proposed bill in fact deliberately calls out the potential to circumscribe apps from countries that count as foreign adversaries.
“It’s not just Tiktok, since we saw the U.S. also took actions before against Huawei and now hundreds of Chinese companies are under U.S. sanctions,” said Wu Xinbo, a director at Fudan University’s Center for American Studies. “In the future, other companies like Temu and other commerce platforms could also be affected and U.S. allies may follow suit to ban Tiktok as well.
This may have a domino effect.”
The U.S. House of Representatives on Saturday put legislation requiring Bytedance to divest its ownership stake in Tiktok on a fast track to become law. The Senate is expected to vote on the bill in coming days. President Joe Biden has said he will sign the legislation promptly. The legislation under consideration gives Bytedance almost a year to divest of Tiktok. That deadline would mean Tiktok would likely survive through the U.S. presidential election in November.
Bytedance has compelling reasons to take on Washington. For starters, it has a much bigger business in the U.S. than it did in 2020 — 170 million users now, up from less than 100 million then — and revenue far surpasses any other market.
Since Trump’s abortive assault, Tiktok has also built up a fledgling e-commerce business that hinges on influencers hawking goods to young Americans. That’s linked it inextricably to swaths of the U.S. economy, from millions of content creators to small business owners that rely on the platform. It’s preparing to debut live shopping in Mexico around July, a person familiar with the matter said.
Just as important, the company thinks it stands a good chance of winning in U.S. courts. It’s arguing that forcing 170 million Americans off the platform will deprive them of their First Amendment rights to free speech, a forceful approach in the American judicial system.
“We’ll continue to fight,” Michael Beckerman, Tiktok’s head of public policy for the Americas, said in a memo to Tiktok’s U.S. staff. “This is the beginning, not the end of this long process.”
For now, it appears neither side is willing to budge. But Bytedance has seen how quickly the tides can turn in Washington.
The preliminary 2020 sale agreement didn’t go through after Donald Trump was voted out of office and Biden showed less interest in pursuing his predecessor’s deal. Trump last month raised concerns that a ban against Tiktok could boost its rival Meta Platforms Inc., which previously suspended Trump from its platforms. Americans go to the polls again this November. Bytedance expects it can get a restraining order on the legislation and then wage a legal battle that could last more than a year, according to one person familiar with the matter.
“It’s also a U.S. election year, so no matter what you do, they can only wait until after the election to see what the situation is like,” said Zhu Feng, executive dean of Nanjing University’s School of International Studies.
Beijing is a big hurdle to any sale of Tiktok. A Tiktok divestiture would require approval from Chinese regulators, who are unlikely to accommodate Washington’s plans. The government there has made it clear it wants neither Tiktok’s prized algorithms nor its valuable data to fall into American hands, a person familiar with Tiktok’s thinking said, asking to remain anonymous discussing company deliberations.
Tiktok’s technology — most apparent in the platform’s addictive scroll of recommended videos that keep users hooked and wanting more — was an issue even back in 2020.