CEO Morning Brief

US Ban on TikTok Looms With Biden Poised to Start 270-day Countdown

Publish date: Thu, 25 Apr 2024, 09:44 PM
TheEdge CEO Morning Brief

(April 24): For TikTok, the clock has started running in its existential fight to avoid a US ban.

Legislation requiring the social media app’s Chinese owners to divest sailed through Congress, capped by Senate passage late on Tuesday as part of a larger foreign-aid package. President Joe Biden plans to sign it on Wednesday — beginning a 270-day countdown for a sale or a US prohibition of the popular video-sharing platform.

TikTok and Beijing-based ByteDance Ltd have vowed to do all they can to stop the measure. They have argued it infringes the free-speech rights of the app’s 170 million monthly US users, and plan to file suits to void the law or at least delay its enforcement.

“We’ll continue to fight,” Michael Beckerman, TikTok’s head of public policy for the Americas, said in a memo to US staff this past week. “This is the beginning, not the end of this long process.”

Biden’s signature will cap years of scrutiny in Washington, where regulators and lawmakers from both parties have voiced increased concern that TikTok’s Chinese ownership poses a risk to US national security. Proponents of the bill claim that China’s government uses TikTok as a propaganda tool, and could demand that ByteDance share US users’ data — allegations the company and officials in Beijing have denied.

With the legal battle set to unfold, TikTok’s US users face a wave of uncertainty about a place to express themselves via video, make money as influencers or sell wares on TikTok Shop. If implemented, a TiKTok ban would risk disrupting “a critical channel for engaging with younger audiences and building brand visibility”, said Damian Rollison, a director of market insights at SOCi.

“TikTok’s unique format has allowed businesses to showcase products and services creatively, leveraging trends and user-generated content to connect with potential customers,” Rollison said.

TiKTok has invoked economic arguments against the law, saying content creators and merchants who make a living from posting videos and selling goods would be hurt financially. While many US lawmakers who backed the newly passed federal bill think it would survive court review, some rights groups say the First Amendment will be a more difficult hurdle to clear.

“The US government can say that a foreign company can’t do business in the US — it’s just more difficult when the foreign business is a communications system that US users use to communicate with each other,” David Greene, a civil liberties director for the Electronic Frontier Foundation, said in an interview. “That just has different legal issues.”

When Montana passed a law in 2023 that would outlaw TikTok in the state, the company and a group of content creators sued in separate requests, saying the state measure violated free expression rights under the US Constitution’s First Amendment. The company funded the users’ lawsuit, according to The New York Times. The judge reviewing the case blocked the ban before it could go into effect.

ByteDance sees a TikTok divestiture as a last resort, according to people familiar with the matter. TikTok’s parent expects it can get a restraining order on the legislation, then wage a legal battle that could last more than a year, Bloomberg has reported.

If TikTok can’t slow enforcement through the legal system, another chance of avoiding a separation may lie with a new administration. Biden’s signing the bill on Wednesday puts the divestiture deadline to Jan 19 — a day before the next presidential inauguration.

Under the bill, Biden has the option to extend that deadline by an additional 90 days if he sees progress towards a sale. That would push a possible ban well into the next presidential term.

Biden’s opponent in the November election, Donald Trump, has recently come out against a TikTok ban, saying it could boost rival Meta Platforms Inc — which previously suspended Trump from its platforms. For Trump, that marked a reversal from his decision while being the US president to ban the app via a 2020 executive order that was later voided by federal courts.

The political sensitivities of targeting a social media platform popular with younger users during a US election year were not lost on the bill’s supporters.

“This is not an effort to take your voice away,” Senator Mark Warner, a Virginia Democrat and the chairman of the Intelligence Committee, said on Tuesday before the vote. “To young Americans, I want to say, we hear your concern. We hope that TikTok will continue under new ownership.”

Passage marks a significant setback in Washington for ByteDance, which spent US$2.7 million (RM12.89 million) in the first quarter on federal lobbying efforts after shelling out a record US$8.7 million last year, according to congressional filings. TikTok chief executive officer Shou Zi Chew made personal appeals on Capitol Hill in an unsuccessful bid to stifle the legislation.

Meanwhile, the company spent more than US$2 billion on shielding sensitive US user data, with help from Texas-based Oracle Corp, to try to show that its platform is safe.

With the app back in regulatory and legal limbo, many TikTok users aren’t fleeing just yet. But those who make money on the app are reviewing their options.

Educational Insights, which owns the popular Kanoodle puzzle game, has been using TikTok videos for several years to market its products. The company was among the first merchants to join TikTok Shop as part of an early test before it officially went live.

“At the moment, we are definitely monitoring closely,” said Alyssa Weiss, Educational Insights’ senior marketing manager. “We will be ready to pivot should the need arise, but for now, we are still actively rolling out our TikTok plans.”

Source: TheEdge - 25 Apr 2024

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