Implications of US Legislation on TikTok's Operations
The US House of Representatives has decisively passed a bill demanding that TikTok sever ties with its Chinese parent company, ByteDance, or face a ban in the United States.
This vote, which ended with 352 in favour and 65 against, highlighted a rare moment of bipartisan unity and underscored deep congressional concerns regarding TikTok’s connections to China and potential national security risks.
The legislation represents a significant challenge for TikTok, a worldwide leader in social media that has become synonymous with viral video content.
The bill underscores widespread worries about the Chinese Communist Party's potential influence over businesses operating out of China, fueled by fears that the personal data of millions of American users could be compromised.
In defence, TikTok has consistently argued that ByteDance operates independently of any government, including China's. ByteDance also contends that it should not be classified as a Chinese entity, noting that 60% of its ownership is held by international investors.
The possibility of a US ban on TikTok has not only heightened diplomatic tensions between Washington and Beijing but has also influenced global political discourse.
For instance, Australian Prime Minister Anthony Albanese has indicated that while the US might be moving towards a ban, Australia does not intend to follow the same path.
The European Union is intensifying its regulatory scrutiny over major online platforms, focusing now on TikTok. The European Commission has threatened to suspend TikTok Lite’s rewards program, which compensates users for their time spent on the app.
The suspension could be enacted as soon as Thursday. Commissioner Thierry Breton criticised the program as "toxic and addictive," highlighting its particular impact on children.
TikTok has been given a deadline until Wednesday to justify the continuation of this rewards program, failing which it faces suspension starting Thursday, 25 April.
The European Commission could suspend the TikTok Lite rewards programme, which pays users to spend time on the app, as soon as this Thursday.
Commissioner Thierry Breton said the feature is "toxic and addictive", particularly when used by children.
TikTok has until Wednesday to defend the rewards programme, or it could be suspended as early as Thursday 25 April.
Despite implementing significant measures such as routing all American user data to Oracle servers in Texas to enhance data security, TikTok has not fully alleviated the transparency concerns posed by Congress. The company maintains that this strategy ensures that all U.S. user data is securely stored domestically.
TikTok's CEO, Shou Zi Chew, a Singaporean national, has been under intense scrutiny from Congress since 2023, which is wary of any potential links between the company and the Chinese government.
Chew insists that his background distinctly separates him from any government ties and has pledged continued efforts to protect both user data and access to TikTok in the U.S.
In response to legislative pressures, TikTok has mobilised its substantial U.S. user base, which numbers 170 million—many of whom are young—to lobby against the proposed regulations.
This mobilisation included urging users to contact Congress to express their opposition. However, this aggressive lobbying strategy has irritated lawmakers, amplifying their concerns about the influence of Chinese operations on American soil.
"We will not stop fighting and advocating for you," CEO Shou Zi Chew reassured users in a video posted on TikTok.
The ownership and operational details of ByteDance, TikTok's parent company, remain opaque. While ByteDance is headquartered in Beijing and registered in the Cayman Islands, TikTok claims it does not have a single global headquarters, with major offices in Los Angeles, Singapore, and New York City among others.
According to Kenton Thibaut, a senior resident China fellow at the Atlantic Council’s Digital Forensic Research Lab, ByteDance’s private status means that the available information about its ownership comes directly from the company.
"Its ownership is not possible to verify," Thibaut stated.
However, she noted that the company has made disclosures in Washington, D.C. courts, to investors, and in documents with the Chinese government. These disclosures indicate that 60% of TikTok is owned by global investors.
Furthermore, a TikTok spokesperson informed PolitiFact that ByteDance’s board of directors comprises three Americans: Arthur Dantchik, co-founder of Susquehanna International Group; William Ford, CEO of General Atlantic; and Philippe Laffont, founder of Coatue Management. This international presence on the board underscores the global investment influence within the company.
TikTok is gearing up for a potentially prolonged legal battle as it faces impending U.S. legislation that threatens its operations.
Michael Beckerman, TikTok's head of public policy in the U.S., has vowed to challenge the bill in court if it is enacted, arguing that it violates the First Amendment rights of the platform's 170 million American users.
Beckerman is actively preparing the company for a series of strategic discussions and legal confrontations to come.
Adding to the company's challenges, Erich Andersen, TikTok's general counsel, is reportedly planning to resign ahead of these legal confrontations, although he intends to assist the company through these initial tumultuous phases.
The U.S. Senate is likely to approve the bill soon as part of a larger national security package that also includes aid for Ukraine and Israel, with President Joe Biden expected to sign it into law.
This development poses significant questions regarding TikTok's future in the U.S., its ownership structure, and the broader impact on global tech firms caught in geopolitical tensions.
Significant stakes are involved, particularly for ByteDance's major investors, like Jeff Yass’s Susquehanna International Group, which has invested heavily in TikTok's parent company since its inception.
With the potential opposition from Beijing against a forced sale and the myriad of legal hurdles in the U.S., the situation is complex and fraught with uncertainty.
Market analysts are now speculating on potential buyers for TikTok's profitable U.S. operations, which could be valued as high as $100 billion. This leads to the critical and ultimate question looming over the saga: Should ByteDance be compelled to divest, who will step forward to buy TikTok's U.S. operations?
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