The countdown begins: TikTok navigates uncertain future amid US ban bill

A legislation passed on 13 March by the US House of Representatives which is currently pending in the Senate would force TikTok's parent company to sell it within 180 days or face a nationwide ban. Is there still room for manoeuvre and can TikTok turn the situation around?
TikTok offices in Culver City, California, US, on 20 March 2024. (Bing Guan/Bloomberg)
TikTok offices in Culver City, California, US, on 20 March 2024. (Bing Guan/Bloomberg)

(By Caixin journalists Du Zhihang, Guan Cong, Qu Yunxu and Denise Jia)

Just six months ago, TikTok, the short-video app owned by Beijing-based ByteDance Ltd., was charging headlong into the US e-commerce market. From September through December, nearly US$1.2 billion of goods were sold on the platform used by 170 million Americans. This year, the app aims to generate as much as US$20 billion in gross merchandise volume (GMV) in the world’s biggest consumer market.

That goal is now threatened by legislation passed on 13 March by the US House of Representatives and is pending in the Senate that would force the parent company to sell TikTok within 180 days or face a nationwide ban.

Zhang Yiming, the founder and a major shareholder of ByteDance, steadfastly opposes a sale, several people close to the company told Caixin. Meanwhile, TikTok CEO Chew Shou Zi embarked on a lobbying mission to Washington on 12 March, aiming to sway opinions in the Senate.

“Although the hope is slim, Chew is still trying to turn around” the situation, said a person close to TikTok’s top management.

The clock is ticking. The bill was sped through the House in just eight days, passing on a bipartisan vote of 352 to 65. Whether and how fast the legislation becomes law depends on many variables, such as potential hearings and reconciliation of the Senate and House versions.

In addition to concerns about Chinese influence, there is speculation that use of the app following the outbreak of the Israel-Hamas war is fuelling efforts to prohibit the platform.

Mobilising users

Faced with a life-or-death crisis, TikTok pursued an aggressive strategy. Before the House vote, the app sent a pop-up message to its 170 million US users with a call button, urging them to phone their representatives to “tell Congress what TikTok means” to them. After the bill passed, Chew posted a video on TikTok, pledging he would not stop fighting to prevent the legislation from becoming law and again urged users to tell their senators to vote it down.

(Graphic: Caixin)
(Graphic: Caixin)

Previously, TikTok had deliberately distanced itself from politics by banning paid political ads and monetisation by political figures on the platform. These efforts were rewarded with a period of relative calm. Before President Biden said he would sign the TikTok ban bill if it reached his desk, his reelection campaign had launched a TikTok account last month and posted its first video about the Super Bowl.

If the US bans TikTok, Canada and the UK may follow suit and prohibitions might spread globally — which is the biggest concern for ByteDance shareholders, according to the person close to TikTok’s top management.

Canada already banned TikTok on government-issued mobile devices in February 2023 following similar moves by the Biden administration and numerous US universities. Canadian Prime Minister Justin Trudeau told reporters after the House bill passed that TikTok has been under review because of national security concerns since September. He said the Canada government is watching how the situation unfolds in the US.

In addition to concerns about Chinese influence, there is speculation that use of the app following the outbreak of the Israel-Hamas war is fuelling efforts to prohibit the platform. Since the conflict erupted in October, TikTok posts using the hashtag #StandwithPalestine have generated almost 3 billion views, compared with about 200 million views on posts using the hashtag #StandwithIsrael, data shows.

TikTok said it had removed more than 925,000 videos from the Israel-Hamas conflict region for violating its policies regarding violence, hate speech, misinformation and terrorism, including content promoting Hamas.

Chew Shou Zi (centre), chief executive officer of TikTok, departs following a meeting with Senator John Fetterman (not pictured), a Democrat from Pennsylvania, in Washington, DC, US, 14 March 2024. (Tierney L. Cross/Bloomberg)
Chew Shou Zi (centre), chief executive officer of TikTok, departs following a meeting with Senator John Fetterman (not pictured), a Democrat from Pennsylvania, in Washington, DC, US, on 14 March 2024. (Tierney L. Cross/Bloomberg)

That gap provides evidence that the app is being used by foreign governments to boost propaganda and brainwash Americans, said Mike Gallagher, chairman of the House Select Committee on the Chinese Communist Party, who introduced the TikTok legislation.

The platform has defended its policy on terrorist and hate content. In a statement in November, TikTok said it had removed more than 925,000 videos from the Israel-Hamas conflict region for violating its policies regarding violence, hate speech, misinformation and terrorism, including content promoting Hamas.

Uncertainty in Senate

In the Senate, there is still room for TikTok to manoeuvre. First, the bill may not move as quickly in the upper chamber as it did in the House. Senate Majority Leader Chuck Schumer has not scheduled a discussion or vote on the TikTok bill, only saying that the Senate will review the House bill after it is submitted.

With only a third of Senate seats up for election this year, senators face much less electoral pressure to take sides on the issue than members of the House, where all seats are up for election in November, said Zhu Keliang, a partner in the Silicon Valley, California, office of Chinese law firm DeHeng Law Offices.

The bill’s fate in the Senate, where several senators have expressed opposition to it, is uncertain. Senator Rand Paul of Kentucky said Americans choose to use TikTok to express themselves. “I don’t think Congress should be trying to take away the First Amendment rights of [170] million Americans,” he said.

The 180-day timeline set in the House bill suggests that if a final bill is signed into law prior to July, TikTok would face a ban or be forced to divest before the inauguration of the next president in January 2025... — Liu Tianyi, CEO, Policy Nexus

Signage for ByteDance on a building in Shanghai, China, 14 March 2024. (Qilai Shen/Bloomberg)
Signage for ByteDance on a building in Shanghai, China, on 14 March 2024. (Qilai Shen/Bloomberg)

In an interview with NewsNation on 12 March, Paul said he believed a ban on TikTok would be unconstitutional. “You can’t just pass a law and take someone’s property,” he said.

Some senators have spoken in support of the legislation, including Republican Senators Josh Hawley and Chuck Grassley and Democratic Senator Richard Blumenthal. Grassley and Blumenthal also said they needed further discussion and to hear more input before making a final decision.

If the Senate opts to pass its own version of the legislation — rather than approving what the House acted on — a round of negotiation, or reconciliation, would be required to create a final bill that need to be voted on by each chamber. That process would give TikTok some breathing room and an opportunity to lobby Congress for a more favourable outcome.

Some key senators are already working on their own legislation to regulate the app. Democratic Senator Maria Cantwell, chairwoman of the Senate Commerce Committee, which has jurisdiction over the bill, has stressed patience and suggested alternative paths forward. Some senators think this approach may take months before any legislation emerges for a vote in the Democratic-controlled Senate.

July will be a pivotal month for TikTok’s lobbying effort, said Liu Tianyi, CEO of North American policy consulting firm Policy Nexus. The 180-day timeline set in the House bill suggests that if a final bill is signed into law prior to July, TikTok would face a ban or be forced to divest before the inauguration of the next president in January 2025, Liu said. Should the legislation be signed into law after July, the deadline for TikTok's ban or divestiture would extend into the tenure of the next US administration. The uncertainty intensifies with the possibility of Donald Trump's return to office, given his previous stance on TikTok, Liu said.

A person holds a sign during a press conference about their opposition to a TikTok ban on Capitol Hill in Washington, DC, US on 22 March 2023. (Brendan Smialowski/AFP)
A person holds a sign during a press conference about their opposition to a TikTok ban on Capitol Hill in Washington, DC, US, on 22 March 2023. (Brendan Smialowski/AFP)

Furthermore, the Congress’ August recess and the upcoming elections could divert attention from the bill, Liu said.

In his minute-long video posted on TikTok after the House bill passed, Chew asked US users to “keep sharing your stories, share them with your friends, share them with your family, share them with your senators”.

These actions may act as a double-edged sword, as congressional offices were bombarded with calls from TikTok users, making lawmakers personally aware of the mobilisation power of the video platform. Supporters of the bill fear that the wildly popular platform may be used by China’s government to influence US elections, a claim TikTok has repeatedly denied.

The head of a Washington lobbying firm said that TikTok’s pop-up message to users actually increased the pressure on the Senate to make decisions. “Senators have to consider the influence of TikTok, but they are also more certain about the potential threat,” he said.

Not for sale

While Congress pushes towards a bill that might ban TikTok, at least one potential buyer of the app has emerged. Former US Treasury Secretary Steven Mnuchin said on 14 March that he is building an investor group to acquire the platform. “This should be owned by US businesses,” he told CNBC. “There’s no way that the Chinese would ever let a US company own something like this in China.”

With the strengthening of antitrust scrutiny in the US, many potential buyers may worry that the takeover of TikTok will be challenged by the government as it will reduce competition in e-commerce or social media... — Professor Anupam Chander, Faculty of Law, Georgetown University, Washington, D.C

(Graphic: Caixin)
(Graphic: Caixin)

TikTok would become a highly sought-after asset if put up for sale, said Zhu of DeHeng Law Offices. Leading in the short video platform race, TikTok boasts significant advantages, including its superior recommendation algorithms and vast user base. Additionally, its e-commerce and live broadcasting sectors are still in the early stages of development, presenting potential growth opportunities, Zhu pointed out.

The rise of TikTok comes as traditional social media giants like Facebook and YouTube are grappling with an ageing user demographic and waning popularity. But these direct competitors may baulk at a takeover of the rival, said Anupam Chander, a professor of science and technology law at Georgetown University in Washington, D.C.

With the strengthening of antitrust scrutiny in the US, many potential buyers may worry that the takeover of TikTok will be challenged by the government as it will reduce competition in e-commerce or social media, Chander said.

The person close to ByteDance's top management told Caixin that TikTok is not seeking any potential buyers at the moment because there won’t be a sale, and even if there is, a deal won’t be reached in time.

A TikTok sale to a US company would have to be cleared by the Chinese government. Lawyers familiar with ByteDance’s domestic compliance expect Chinese regulators wouldn’t approve such a transaction.

Bao Yunhong and Zhao Wei contributed to this report.

This article was first published by Caixin Global as "Cover Story: The Countdown Begins: TikTok Navigates Uncertain Future Amid U.S. Ban Bill". Caixin Global is one of the most respected sources for macroeconomic, financial and business news and information about China.

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