Why I Believe TikTok Can't Escape This Crisis#
Background#
• After the Trump administration's failed attempt to ban TikTok, the U.S. is once again trying to push for TikTok's divestiture from ByteDance through legislation, namely the "Sell or Shut Down" bill. TikTok has sought help from the last line of defense in the U.S. judicial system—the Federal Circuit Court.
• However, the Federal Circuit Court recently ruled to uphold the divestiture bill. Public opinion is divided: some believe TikTok cannot escape this crisis, while others think it will ultimately delay through appeals for years, just like in 2020, or even overturn the ban.
Core Contradictions#
The TikTok issue can be analyzed from three perspectives:
- China's Position
According to China's Cybersecurity Law and related regulations, Chinese companies must cooperate with the government in providing information. Additionally, the Chinese government explicitly requires that the export of core technologies, such as algorithms, must be approved, creating institutional barriers for TikTok's divestiture.
- U.S. Concerns
The U.S. believes TikTok may pose a threat to national security. Although there is currently no clear evidence, potential risks include:
• The Chinese government could potentially access U.S. user data through ByteDance.
• TikTok's powerful recommendation algorithm and its influence could be used as a tool for public opinion. For example, TikTok once urged users to contact lawmakers to oppose related bills, an action seen by some as interference in democratic processes.
- The Relationship Between TikTok and ByteDance
Although TikTok is registered as a U.S. company, its technology, core algorithms, and backend support are almost entirely reliant on ByteDance. The algorithm is TikTok's core asset, and the Chinese government is unlikely to allow its sale. Furthermore, TikTok's global operational model heavily depends on ByteDance's resources, including cheap domestic labor and various subsidy policies.
My Analysis#
I believe the outcome may unfold in one of the following four scenarios:
- Complete Divestiture: TikTok is sold entirely, completely severing ties with ByteDance.
This is highly unlikely. The Chinese government has clearly opposed the sale of algorithms, which involves core technology security, leaving almost no room for maneuver.
- Refusal to Divest and Being Banned: TikTok is forced to exit the U.S. market.
There is a certain possibility, but it does not align with the interests of all parties:
• U.S. Government: Banning TikTok may provoke public backlash and allow giants like Meta or Google to capture the market, further exacerbating monopoly issues. At the same time, the rights of U.S. investors would also be difficult to protect.
• Chinese Government: A ban offers no real benefits to China and is more of a symbolic pressure tactic.
• ByteDance: Losing the U.S. market would result in significant financial losses, especially considering its previous long-term investments in TikTok.
- Partial Divestiture (Excluding Algorithms): Selling assets other than the algorithm to a U.S. company.
This is currently the option that best aligns with the interests of all parties:
• U.S. Government: No need to ban TikTok while alleviating security concerns.
• Chinese Government: Avoiding the loss of core algorithms.
• ByteDance: Raising funds through sales to partially mitigate losses.
Potential buyers could be giants with existing recommendation algorithm capabilities, like Microsoft; or investors with e-commerce needs, like Walmart.
- Bill Rejected by the Supreme Court: TikTok receives legal protection.
The likelihood of this outcome is low. This case is different from the situation in 2020; the divestiture bill was pushed by Congress and signed by President Biden, giving it greater legitimacy.
Why is the likelihood of the bill being rejected low?#
- The Close Relationship Between TikTok and ByteDance
Multiple hearings have shown that TikTok has consistently failed to provide a convincing plan to sever ties with ByteDance. While its data is stored in the U.S., its technical operations and algorithms rely on ByteDance's team in China, a structure that is unlikely to satisfy U.S. lawmakers. Although the data is in the U.S., it does not mean that employees of ByteDance in China or the U.S. do not have access to it.
- Pressure on the Supreme Court
• The 2020 ban on TikTok was a presidential order from Trump, at which time the Supreme Court could question executive judgment. However, this divestiture bill has gone through congressional review and presidential signing, giving it stronger legitimacy and significantly increasing the pressure on the Supreme Court to reject it.
• The Federal Circuit Court has clearly ruled that the essence of the TikTok issue lies in national security, not freedom of speech, and that the judiciary should avoid intervention as much as possible. If the Supreme Court intervenes, it would mean questioning the judgments of the executive, legislative, and intelligence agencies, which is almost impossible.
- TikTok's Uncooperative Attitude
• TikTok has shown no willingness to rectify or compromise, instead continuing to expand its technical team.
• Its algorithm model was trained in the U.S., violating relevant Chinese regulations, creating a "double bind" that leaves both sides unable to back down.
Possibility of Trump Intervening#
- Trump's statements are not reliable, such as those about disinfectants or granting green cards to international students upon graduation, which are unrealistic.
- Trump's appointed Secretary of State, Rubio, is one of the leading lawmakers pushing to ban TikTok.
- Trump has expressed a desire not to ban TikTok but has not ruled out a sale, which would also satisfy investors' interests.
Conclusion#
- The likelihood of the Supreme Court rejecting the bill is extremely low, and it may even refuse to hear it outright.
- The close relationship between TikTok and ByteDance makes it unlikely that either the U.S. or China will make unilateral concessions.
- A complete ban on TikTok is not the best choice for any party; partial divestiture (excluding algorithms) is the most feasible solution.