TikTok Ban: 4 Things You Need to Know
Congress is teetering on the edge of passing a bill that could kick TikTok to the curb unless its Chinese owner, ByteDance Ltd., sells it off within a year. Brace yourself for a seismic shift in the social media landscape as the ban looms, sending shockwaves through companies like Meta Platforms and Alphabet. But hold on tight, because ByteDance isn't going down without a fight, and they're likely to challenge this law in court.
So, what's the next move?
Will TikTok face the guillotine or find a savior through a sale?
The ban has been a hot topic in Congress before, but now, with its attachment to a whopping $95 billion foreign aid package, it's on the fast track to approval after being passed by the House of Representatives on Saturday. Brace yourself, because it's expected to breeze through the Senate, reach President Joe Biden's desk, and get the green light from the White House.
But let's not jump to conclusions just yet. Banning or forcing the sale of TikTok won't happen overnight. The law stipulates that ByteDance needs to bid farewell to TikTok within approximately nine months. However, if progress is made toward a sale, President Biden could extend the deadline by another 90 days. And hey, this bill might not just target TikTok—it could apply to other China-based apps if the president deems them a threat to national security.
Can ByteDance put up a formidable defense?
They're planning to challenge the law's constitutionality, but the odds aren't in their favor. The legislation's specifics make it unlikely that ByteDance can drag out the process for long. Here's why: the bill grants ByteDance and other affected companies a mere 165 days to challenge the law or 90 days to challenge a divestment order. And guess what? These challenges bypass lower courts and go straight to the U.S. Court of Appeals for the D.C. Circuit. That means less time for TikTok to play the judicial system to their advantage.
Naturally, TikTok isn't keeping quiet about the whole ordeal. When asked for comment, they chose to bite back, suggesting that the bill would trample on the free speech rights of 170 million Americans, devastate seven million businesses, and wipe out a platform that contributes a staggering $24 billion to the U.S. economy annually. TikTok could argue that this bill violates the Constitution's protection of free speech and that it's an unconstitutional "bill of attainder," unfairly singling out a specific company for punishment without a trial. They've used similar arguments in a legal battle against a Montana law that aimed to ban TikTok from the state. And hey, guess what? A federal judge recently put a stop to that law, stating that it likely infringed on the First Amendment.
Who are the potential buyers?
If ByteDance wants to dodge the ban, they might try to sell TikTok. But hold your horses because it's not as simple as it sounds. China would have to give the green light to any sale involving TikTok's algorithm. In 2020, when the Trump administration toyed with the idea of a TikTok ban, the Chinese government added content-recommendation algorithms to its export-control list. This means that TikTok's algorithm was off-limits to any foreign owner unless China said otherwise.
Now, let's talk winners and losers.
If ByteDance fails to sell TikTok and the ban takes effect, brace yourself for a whopping 170 million social media users, along with the company's advertisers and content creators, who will be forced to find a new digital abode. So, who stands to gain from this shake-up? Instagram and Facebook, owned by Meta Platforms, and YouTube, owned by Alphabet, are poised to emerge as the big winners.
These heavyweights operate their own short-form video platforms—Reels and Shorts, respectively—which are TikTok's biggest competitors in the U.S. market. Analysts at Bernstein estimate that Meta Platforms would grab around 55% to 60% of TikTok's U.S. ad revenue, while YouTube would snatch up another chunk, accounting for about 25%. Ouch! That doesn't leave much for SnapChat's parent company. Snap generates approximately 3% of Meta's annual ad revenue.