The bill moved unusually fast, getting signed into law by the president less than two months after it was first unveiled in the House. Biden’s signing kicks into place a timeline for TikTok’s China-based parent company, ByteDance, to sell the app or face a ban from U.S. app stores and networks.
ByteDance will have up to a year to find a buyer, but the process is likely to be marred by Chinese rules dictating the export of technology and a court challenge from TikTok.
“This unconstitutional law is a TikTok ban, and we will challenge it in court,” a TikTok spokesperson said in a statement.
The Foreign Adversary Controlled Applications Act, which was added to the foreign aid package Congress passed this week, would force ByteDance to divest TikTok or be banned in the U.S.
Supporters of the measure say TikTok poses national security concerns because of its ownership by a Chinese company, which they say exposes the sensitive data of American users to the Chinese government. TikTok has pushed back against those accusations.
WedBush Securities analysts said in a memo Tuesday the “likely buyers” for TikTok would be Microsoft or Oracle, which was involved with the TikTok’s “Project Texas,” an attempt by TikTok to ease concerns by putting U.S. data in U.S.-based Oracle servers, and “strategically would make a logical fit.”
“A number of private equity and consortiums would also clearly put together bids for this asset with Former Treasury Secretary Steven Mnuchin among many that have shown early interest for this key asset,” the analysts said in the memo.
But China’s export control rules are a crucial hurdle that could muddy the process of another company purchasing the app and how it continues to operate after a potential sale.
The rules, updated in 2020, include restrictions on the sale of specific technologies such as algorithms without government approval. China will likely try to block the sale of TikTok’s algorithm itself, said Stephen Weymouth, an associate professor Georgetown University’s McDonough School of Business.
“The value of TikTok is the algorithm, and it’s not obvious who would be interested in buying TikTok if the algorithm doesn’t come with it. You’re buying a brand rather than an actual useful app,” Weymouth said.
A lawsuit could also tie up a potential ban and possibly drag out the 270-day deadline.
TikTok has been successful before at blocking attempts to ban the app, both under the Trump administration and in an attempt by Montana.
The federal law, though, may have a better chance than a state law like Montana’s, because “federal legislation is more likely to be seen by the courts both as responding to an addressing national security concerns,” Justin Hurwitz, a senior fellow and academic director of the University of Pennsylvania’s Center for Technology, Innovation and Competition, said in an email.
Read more in a full report at TheHill.com.
