US Appeals Court Upholds TikTok Divestment Law, Paving Way for Potential Ban

A US federal appeals court has upheld legislation requiring ByteDance, the Chinese parent company of TikTok, to divest its US operations by early next year or face a nationwide ban on the popular short video app. The ruling, delivered on Friday, represents a significant win for the Justice Department and critics of TikTok, heightening the likelihood of a ban in just six weeks. TikTok, which is used by 170 million Americans, has announced plans to appeal the decision to the Supreme Court.

Bipartisan Effort to Address National Security Risks

The appeals court emphasized the bipartisan nature of the law, which was shaped by cooperation between Republicans, Democrats, and two presidential administrations. It described the law as part of a broader effort to counter national security risks posed by the People’s Republic of China (PRC). According to Reuters, the Justice Department has asserted that TikTok’s Chinese ownership poses a security threat due to its access to extensive data on U.S. users, which could potentially be exploited by Beijing to manipulate information.

Attorney General Merrick Garland hailed the ruling as “an important step in blocking the Chinese government from weaponizing TikTok.” However, the Chinese Embassy in Washington denounced the legislation as “a blatant act of commercial robbery,” urging the U.S. to handle the matter cautiously to avoid damaging bilateral relations.

Related: Canada Orders Dissolution of TikTok’s Business Amid National Security Concerns

Economic and Diplomatic Ramifications

The decision comes amid escalating trade tensions between the United States and China. Recent U.S. restrictions on China’s semiconductor industry and Beijing’s retaliatory ban on exporting critical minerals have further strained relations. The ruling was issued by Judges Sri Srinivasan, Neomi Rao, and Douglas Ginsburg, who collectively rejected legal challenges from TikTok and its users. ByteDance now has until January 19 to comply with the divestment order or face a prohibition on its app in the U.S.

Impact on Free Speech and User Rights

The decision has drawn criticism from free speech advocates, with the American Civil Liberties Union (ACLU) arguing that the ruling violates First Amendment rights by restricting Americans’ ability to communicate and express themselves. TikTok CEO Shou Zi Chew, in an email to staff obtained by Reuters, reiterated the company’s commitment to fighting the decision, describing the ruling as disappointing but pledging to continue advocating for free speech on the platform.

The court acknowledged these concerns but justified the decision by underscoring the risk posed by China’s influence over TikTok and its ability to manipulate public discourse. “The First Amendment precludes a domestic government from exercising comparable control over a social media company in the United States,” the opinion noted.

Uncertain Path Forward

Unless the Supreme Court intervenes, the decision places the responsibility for enforcing the January 19 deadline on President Joe Biden. The President has the authority to grant a 90-day extension if ByteDance can demonstrate progress toward a divestiture. However, analysts suggest that the company faces substantial hurdles in meeting these requirements, particularly as Chinese regulatory approval would be necessary for any sale.

The case also carries broader implications for other foreign-owned apps. The law grants the U.S. government sweeping powers to ban apps deemed a threat to national security. Reuters noted that this could pave the way for restrictions on other platforms, mirroring previous unsuccessful attempts by former President Donald Trump to ban Tencent’s WeChat in 2020.

Financial Market Response

The ruling has also influenced financial markets, as investors anticipate potential shifts in social media advertising. Shares of Meta Platforms, which competes with TikTok for ad revenue, surged to an intraday record high and closed up 2.4%. Google parent Alphabet, whose YouTube platform is a direct rival to TikTok, saw its shares rise 1.25%.

The law further prohibits app stores such as Apple’s App Store and Google Play from offering TikTok if ByteDance fails to comply with the divestment order. Apple did not respond to Reuters’ requests for comment, and Google declined to comment.

Source: Reuters