America buys TikTok or the app gets banned – what’s behind this US government decision?

The US government is giving TikTok’s parent company ByteDance an ultimatum. Either the app is sold to a US company or it’ll disappear from the app stores of Google and Apple (and presumably also Microsoft). After the proposal for a corresponding law was already approved by the House of Representatives at the weekend, the Senate also voted in favour on April 23, 2024. Very clearly, in fact – of 97 senators present, 79 were in favour. Now all that remains is for US President Biden to sign the bill into law. He’s already said that he’ll do so today, 24 April 2024. According to the proposed law, TikTok owner ByteDance must find a buyer by the end of this year if the app is to remain available in the USA.

Why is the USA taking such decisive action?

Short video service TikTok is popular all over the world, especially among young people. In the USA alone, over 170 million users have the app on their smartphone – around half of the US population.

The fact that the popular app originates from China is a thorn in the side of many US politicians. The app and its widespread use in the USA is perceived as a security risk. Both Democrats and Republicans claim that ByteDance is passing on user data to the Chinese government, allowing it to spy on US citizens. The US government also fears that TikTok is being misused for anti-Western propaganda. For example, through fake news about the USA or democracy as a whole.

Who owns TikTok?

The owners have already made their opposition to a sale known. Both parent company ByteDance and TikTok itself deny the allegations from the USA. They criticise a lack of evidence supporting the accusation that the Chinese state has access to user data.

In addition, the majority of ByteDance isn’t in purely Chinese hands. Only 40 per cent of it is owned equally by employees of the company and its founders. Around 60 per cent is split between investor companies around the world (page 9/10), including US companies.

What’s particularly interesting is that a large proportion of this 60 per cent is owned by the US-based Susquehanna International Group. Jeffrey Yass – an American, and one of the main donors to the Republican Party in the current election campaign – is its co-founder and director of the company. Former president and current presidential candidate Donald Trump already tried to force TikTok to sell in 2020, but failed in court. By now, the Republican has backed away from his earlier opinion.

For US politicians, however, the exact ownership structure isn’t decisive. To them, the main problem is that ByteDance is headquartered in Beijing, where the company can’t defend itself against the influence of the Chinese government.

ByteDance will go to court

TikTok CEO Shou Chew has already announced his intention to take action against the proposed law. It curtails the right to freedom of expression, according to him. This already worked in Trump’s 2020 attempt. US courts were of the opinion that the law was a violation of the First Amendment of the US Constitution and therefore froze it.

China could also intervene by banning the sale of «sensitive technologies» abroad. The algorithm – ultimately the key to the app’s financial success – could fall into this category. China has already made hints in this direction. If both states were to insist on their respective positions, it’d be the end of TikTok in the USA.

Who would buy TikTok?

In the event that ByteDance loses in court and China doesn’t take any action either, TikTok could be put up for sale. A pretty expensive offer. According to Bloomberg, the estimated value of the app is around 270 billion US dollars. Tech analyst Dan Ives speculates about Microsoft and software company Oracle – but without the background algorithm. The app would have to change its programming. Other social media giants such as Google or Meta, capable of raising such capital, are out of the question due to antitrust regulations.

What does this mean for European users?

Initially, the whole story will drag on. Even if the app were to be banned in the US, TikTok would still be available in Europe. In addition, the removal of the app would only apply to new downloads. TikTok would still be installed on millions of US devices. In addition, the app would presumably still be available via third-party stores in the USA. The same applies, for example, to US apps on Huawei smartphones, which can still be used with a few tricks. In any case, TikTok is also struggling in Europe. This week, the EU Commission opened an investigation into the platform for possible violations of the Digital Services Act.

Nevertheless, content would certainly decrease, making TikTok less financially attractive for both investors and influencers. However, if no agreement is reached before the end of the year, a new US president could seek a different solution next year.