Only America’s courts can save the video app now

Joe biden joined TikTok only two months ago, with a video entitled “lol hey guys”. Now America’s president is poised to sign a bill that could ban the popular app. On April 23rd the Senate approved a measure to crack down on “foreign adversary controlled applications”, including TikTok, as part of a bill approving military aid to Ukraine, Israel and Taiwan. Mr Biden has already said he will sign the bill into law, whatever the feelings of his 300,000 followers, or TikTok’s 170m American users.

The law will give ByteDance, TikTok’s Chinese owner, up to 12 months to sell to a non-Chinese owner. (A previous version of the bill had allowed six months; the new deadline pushes the matter conveniently beyond November’s elections.) A wild selection of possible buyers is touted. Microsoft, Oracle and Walmart have all shown an interest in TikTok in the past. Steven Mnuchin, a former Treasury secretary, says he is putting together a group of investors.

They may not get the chance to bid. China’s government, which owns a stake in ByteDance, has indicated that it does not want to part with TikTok. It has classified the app’s recommendation algorithm as a sensitive technology, whose export would need official approval. In March a Chinese government spokesman warned that, in the case of TikTok, “the relevant party should strictly abide by Chinese laws and regulations,” a comment which some read as a warning to ByteDance.

That would leave TikTok no choice but to shut down in America, where last year it had revenue of $16bn, according to the Financial Times. So the company is pinning its hopes on an appeal to America’s courts. A memo sent to staff on April 21st described the new bill, then recently passed by the House of Representatives, as a “clear violation of [users’] First Amendment rights”, which enshrine freedom of speech.

TikTok has a strong case, believes Evelyn Douek of Stanford Law School. “Decades of precedent hold that the government can’t ban a form of communication because they don’t like the content on it, even when it involves foreign adversaries,” she says. TikTok has won in court before. Last year a judge overturned a ban imposed by the state of Montana, partly on free-speech grounds. An executive order to ban the app by then-president Donald Trump was blocked by judges in 2020.

Those in favour of a ban say the problem is not the content on TikTok, but the company’s conduct. It is accused of harvesting users’ data and manipulating what they see, both of which it denies. If courts can be persuaded that TikTok is up to no good, a free-speech defence will not necessarily save it. In 1986 an adult-book shop in New York lost a Supreme Court appeal against its closure, when judges argued that the reason for its shutdown was not the content of its books, but other illegal activity taking place on the premises.

If TikTok wins, it could become an even stronger force in social media. “TikTok has been fighting with one hand tied behind its back against domestic competition,” argues Mark Shmulik of Bernstein, a broker. While Meta, its arch rival, has come up with technical fixes to help its advertisers get around privacy changes Apple introduced for iPhones, TikTok has played it safe. If courts remove the threat of a ban, the company “could feel empowered to step on the gas”, Mr Shmulik notes. It might also stem the exodus of senior staff. Kevin Mayer, a former chief executive hired from Disney, left amid Mr Trump’s efforts to ban the app. Vanessa Pappas, its chief operating officer, departed last year. Now Erich Andersen, the chief counsel, is reportedly preparing to move on.

Whatever happens in court, TikTok is already wondering which countries might follow America’s hawkish lead. India, where TikTok had 200m users, banned the app in 2020 (along with several other Chinese apps) following a skirmish at the border with China. Countries including Indonesia and Pakistan have imposed and then lifted short-term bans. The Taliban naturally outlawed TikTok on returning to power in Afghanistan.

Juicier markets look safe for now. No big European country is demanding TikTok be sold. But Europe has a record of eventually following America in its approach to China-related security matters, as in the case of its belated clampdown on Huawei, a Chinese maker of telecoms gear. Countries’ willingness to act will depend partly on the closeness of their security relationship with America. America’s fellow members of the Five Eyes intelligence alliance—Australia, Britain, Canada, and New Zealand—have already banned TikTok on government devices.

Further restrictions on TikTok could disrupt more than the market for social media—if China chooses to retaliate. It fired a warning shot earlier this month, banning app stores from offering apps including WhatsApp and Threads, a pair of Meta products, on national-security grounds. China could make life difficult for plenty of other big American companies. Tesla is suffering because of falling car sales in China (see Schumpeter). Apple’s iPhone sales in China are ebbing. American chipmakers like amd are being hurt, too, as China encourages its smartphone-makers to use domestic chips. America may find that banning a short-video app has long-term consequences. ■

Excerpts: The economist