TikTok (international version of Douyin) is about to face a crucial moment in determining its future in the United States. On Saturday, the U.S. House of Representatives voted on a package of legislative plans to separate or prohibit TikTok, and the bill was passed.
House Speaker Mike Johnson included the TikTok bill in a package of aid to Ukraine, Israel, and the Indo-Pacific region, aiming to expedite the passage of the TikTok bill in the Senate. President Biden has also promised to sign the bill if it is approved by Congress.
On Saturday, the House passed the “21st Century Peace through Strength Act” with 360 votes to 58.
The bill covers national security priorities, including sanctions on Iran, the seizure of frozen Russian sovereign assets, and a measure that could lead to a nationwide ban on TikTok. It gives ByteDance, the Chinese parent company of TikTok, nine months to sell this social media company, or it will be banned from entering U.S. app stores.
An earlier version of the TikTok bill was passed in the House last month but stalled in the Senate. By bundling this bill with the foreign aid package, House Republicans hope to force a quick vote in the Senate on the bill.
If the bill eventually becomes law, what substantial impact will it have on TikTok?
If the bill becomes law, it will give ByteDance, the Chinese parent company of TikTok, up to one year to divest its ownership of TikTok, or else TikTok will be banned in the United States.
However, ByteDance is unwilling to sell TikTok and will do everything possible to avoid such a situation, including legal challenges in the U.S. Additionally, any divestment plan would require approval from the Chinese government. Beijing has previously expressed opposition to forced sales.
TikTok may also ultimately become an independent entity headquartered in the United States, with ByteDance remaining an investor. But this may provoke opposition from some U.S. lawmakers.
Host of “Shark Tank” and Canadian celebrity investor Kevin O’Leary said in March on CNBC’s “Street Signs Asia” program that he is forming a consortium interested in acquiring TikTok for a starting price of $20-30 billion, a 90% decrease from TikTok’s previous valuation in 2023 of $220 billion according to PitchBook data.
He explained that the Chinese government is unlikely to agree to sell TikTok’s algorithm, so any sale transaction would not include the algorithm. Potential buyers would have to “re-engineer” these algorithms using U.S. code and act as “stewards,” transitioning the platform from “TikTok China to TikTok USA,” hence the lowered valuation of TikTok.
Bloomberg said that Meta Platforms and Alphabet appear to be logical acquirers of TikTok, but they are caught in regulatory concerns about monopolies, essentially excluding them. Oracle is also seen as a potential buyer as the software company is already a partner of TikTok in the U.S. It holds TikTok’s U.S. user data and had considered bidding for TikTok in 2020 when then-President Trump tried to force a sale of TikTok. However, Bloomberg noted that Oracle has over $87 billion in debt, including from another major acquisition in 2022, making it unlikely to afford TikTok alone. Microsoft was among the other major contenders to acquire TikTok’s U.S. business in 2020, but the deal ultimately failed.
Former U.S. Treasury Secretary Steven Mnuchin said in a CNBC interview that he is assembling a group of investors to purchase TikTok’s U.S. business, but did not disclose specific details.
If ByteDance does not divest TikTok, the app will be banned in the United States. Despite having over 1 billion users globally, the U.S. market is significant with 170 million users. The U.S. is also the most valuable market for social media as there are many large advertisers willing to pay to reach the American audience.
Bloomberg noted that surrendering the U.S. market to competitors may also pose risks for TikTok’s other global markets, as concerns arise that the U.S. network effect could lure people away from TikTok to alternative products focused on the U.S.
Moreover, the ban could also stifle TikTok’s plans to expand its TikTok Shop business in the U.S. TikTok Shop combines online entertainment with impulse shopping for users. The company predicts that this business could grow tenfold in 2024.
The TikTok bill included in the package of legislative plans has some updates compared to the previous version. For example, giving ByteDance nine months to divest from TikTok compared to six months in the previous version. The new version also stipulates that if progress is made toward a sale, the nine-month deadline can be extended by an additional 90 days, enabling ByteDance to have up to one year to complete the divestment.
These changes seem to address some Senate concerns about the previous six-month deadline being too short.
A key senator who was skeptical of the previous version of the House TikTok bill appears to be satisfied with this change.
“I am pleased that Speaker Johnson and House leadership adopted my suggestion to extend ByteDance’s divestment deadline from six months to one year,” said Democratic Senator Maria Cantwell, Chair of the Senate Commerce Committee, in a statement. “As I said, extending the divestment deadline is necessary to ensure that new buyers have enough time to complete the transaction. I support this updated legislation.”
For a long time, the U.S. Congress has been concerned about the security risks posed by TikTok. TikTok is owned by the Chinese company ByteDance, which is controlled by the Chinese authorities and can be compelled to share U.S. user data.
TikTok has strongly refuted these accusations. In order to dispel national security concerns about TikTok, TikTok launched “Project Texas” in 2022 to store U.S. user data in data centers in the U.S. However, 11 former TikTok employees interviewed by Fortune magazine told a different story.
A former employee named Evan Turner told Fortune magazine that as part of his job, he would send spreadsheets containing data of hundreds of thousands of U.S. TikTok users to ByteDance in Beijing almost every 14 days via email. He said this data included the names, email addresses, IP addresses, as well as geographic and demographic information of TikTok U.S. users. All of this occurred while TikTok was implementing measures to retain sensitive U.S. user data in the U.S. and allowing only U.S. employees to access it.
编辑：林妍#