In the face of potential regulation, U.S. politicians suggest that TikTok may avert a ban by parting ways with its current Chinese ownership.
The essence of an impending bipartisan legislation in the U.S. House of Representatives is the continuation of TikTok’s operation in the U.S., conditional upon divestment by ByteDance, its Beijing-based parent company.
“ByteDance doesn’t need to go through such hardships,” suggested U.S. Rep. Raja Krishnamoorthi, a bill advocate, in a statement on X. “Divesting @tiktok_us would simplify matters for them. The decision is theirs to make.”
However, experts warn that the divestment process is not as straightforward as politicians imply.
Potential Buyers for TikTok’s U.S. Operations
Interests have been expressed in acquiring TikTok’s U.S. business from various quarters, including “Shark Tank” celebrity Kevin O’Leary. Despite that, the proposed six-month timeline presents significant hurdles.
“The extensive valuation of the platform necessitates a prospective buyer with substantial financial resources,” explains Graham Webster from Stanford University, who specializes in Chinese tech policy and U.S.-China interactions. “The negotiation and acquisition process is typically lengthy.”
While large tech enterprises could feasibly afford the acquisition, they would almost certainly encounter formidable antitrust regulatory resistance in both the U.S. and China. Yet, the enactment of this bill and its subsequent legal tests could devalue TikTok, potentially lowering the purchase cost.
“Impending legislation would likely decrease TikTok’s market value,” remarked Matt Perault, director of the Center on Technology Policy at UNC, which is funded in part by TikTok alongside other tech entities. “With the sale deadline looming, ByteDance may face pressure to sell at a depreciated price.”
The Mechanics of TikTok’s Potential Divestment
The proposed bill would outlaw TikTok in the U.S. unless there is a certified divestment.
This could only be actualized with the U.S. president’s assurance, via an interagency review, that TikTok no longer operates under foreign adversary control and has completely severed ties with ByteDance, including data sharing and algorithm collaboration.
The bill concerns around the possibility of ByteDance succumbing to Chinese legislation that may coerce them to partake in intelligence activities.
This targeted bill diverges from the norm, with a divestiture typically falling under scrutiny of CFIUS.
Precedents of Proposed Sales of TikTok
A prior endeavor in 2020 during the Trump administration arranged for Oracle and Walmart to assume a significant stake in TikTok on grounds of national security.
Moreover, Oracle would handle all of TikTok’s U.S. user data to comply with security protocols. Microsoft, although unsuccessful, also engaged in acquisition talks. However, various hindrances, like impending legal actions and the presidential election, curtailed the sale.
President Joe Biden reversed the Trump administration’s course of action in 2021 and dismissed the lawsuits. Biden now supports legislative action on TikTok, divergent from Trump’s current standpoint.
FAQ Section
Why do U.S. lawmakers want ByteDance to divest TikTok?
U.S. lawmakers have concerns that the data of American users could potentially be accessed by the Chinese government due to China’s national security laws. Divestment would theoretically put TikTok under U.S. control and alleviate these concerns.
What happens if ByteDance doesn’t sell TikTok?
If ByteDance does not comply with a potential divestment mandate and the bill is passed, TikTok could face a ban in the United States.
Which U.S. companies are potential buyers for TikTok?
Though not explicitly stated, large technology companies with sufficient capital may express interest; however, they would likely face intense regulatory scrutiny. Oracle and Walmart were part of a previous bid to buy stakes in TikTok.
How soon would a divestment need to occur?
The proposed legislation states a six-month deadline for ByteDance to divest TikTok’s U.S. operations to avoid a ban.
Could the price of TikTok decrease because of the bill?
Yes, pressure to sell before a ban could significantly lower TikTok’s sale price according to experts.
Conclusion
The discourse on TikTok’s future in the U.S. market persists, with a bipartisan bill advocating for its divestiture rather than an outright ban. Navigating the complexities of such a sale, especially within the constraining timelines and political landscape, remains an intricate pursuit. Beyond legislative influences, the potential sale would be further complicated by the need for a suitable buyer capable of meeting both the financial demand and the regulatory approval process of two superpower nations. Regardless of the outcome, the proceeding months will be critical in shaping the presence and operational dynamics of TikTok within the United States.