TikTok Won’t Just Disappear After Trump’s Deadline for a Sale
(Bloomberg) -- It's looking increasingly likely that TikTok won’t be able to sell its U.S. operations by the mid-September deadline imposed in an executive order issued by President Donald Trump last month. That doesn’t mean the video app beloved by tens of millions of teens will go dark overnight.
Trump on Thursday said he wouldn’t extend a Sept. 20 deadline for a deal. But ByteDance Ltd., TikTok’s Chinese owner, may need more time to negotiate with suitors after new regulations from Beijing complicated the deal. The president has said if a deal isn’t done by the specified date then he’ll shut down TikTok.
But unlike India, which recently banned the app and immediately severed users’ access, the U.S. doesn't afford the president the authority to close down a social media site or require service providers to block access to an app. So TikTok could remain on people’s phones and they’d still be able to create dance videos, at least for a while.
Experts say the more likely scenario would be requiring Apple Inc. and Alphabet Inc.’s Google to kick TikTok out of their app stores and cut off access to developer tools, preventing new downloads and subsequent software updates to current users. That, in effect, could render the app inoperable in the long run. The TikTok user experience could be degraded even sooner for purchasers of Apple’s upcoming iPhone model if TikTok loses developer access and can’t format the app and its features for Apple’s newest smartphone.
“There is no authority in the U.S. to ban TikTok content, ban people from watching it, or ban people for working with TikTok, that’s just the president exaggerating his authority to put pressure on the deal,” says James Lewis, director of the Technology Policy Program at the Center for Strategic & International Studies, a Washington think tank. “You can put obstacles up, but there are workarounds.”
TikTok has filed a lawsuit against the Trump administration calling the executive order unconstitutional.
The order could also make it difficult for other companies to do business with TikTok, such as buying ads or selling the company cloud services. Without access to U.S. servers from Amazon Web Services, for example, TikTok could be forced to route massive amounts of data through overseas servers and that could materially slow down the user experience, says Daniel Sinclair, an independent security researcher who studies TikTok and social media.
U.S. officials have been concerned about Chinese control over data of U.S. citizens for years. But Trump ratcheted up the pressure on ByteDance earlier this summer as part of a larger campaign against China ahead of November’s U.S. presidential elections. Trump has been frustrated by the slow implementation of a trade deal between the two countries and the spread of the coronavirus, for which he blames China.
In August, Trump issued a pair of executive orders requiring ByteDance to sell TikTok’s U.S. operations or shut them down, citing national security concerns. The administration claims that ByteDance could be compelled to hand over U.S. users’ data to Beijing or use the app to influence the 100 million Americans who use it.
Trump’s orders set off a deal-making frenzy by potential American suitors: Oracle Corp. and a joint bid by Microsoft Corp. and Walmart Inc. emerged as top contenders. But a new Chinese law limiting the sale of artificial intelligence technology outside its borders slowed deal negotiations as all sides seek clarity on what the new rules would mean for a TikTok sale.
In preliminary talks with Chinese officials, ByteDance has been told any proposal must be submitted for approval with detailed information about technical and financial issues, and the review will be substantial and take time, a person familiar with the discussions told Bloomberg News. Trump isn’t being flexible.
“We’ll either close up TikTok in this country for security reasons, or it will be sold,” Trump told reporters Thursday before boarding the presidential aircraft for a campaign trip to Michigan. “There will be no extension of the TikTok deadline.”
Now, it’s unclear if TikTok will meet the September deadline to sell its American operations outlined in Trump’s initial executive order issued on Aug. 6. That order gave TikTok 45 days to sell itself or stop doing business with Americans, invoking the International Emergency Economic Powers Act, which gives the president broad authority to regulate financial transactions in a national emergency. “The White House could argue that the terms and conditions users sign and consent to when they download an app is a financial transaction, even though no cash changes hands,” Lewis says.
That means the Trump administration could order American companies like Google and Apple to stop carrying the app, but couldn’t stop American teens from finding workarounds to access the website or view the content.
Apple and Google didn’t immediately respond to a request for comment.
Already, heavy TikTok users have started to look for workarounds. One popular TikTok creator, who goes by @carrieberkk on the app, garnered 90,000 views with an informational video advising users to switch their phone’s region settings to Canada, where she reckoned the app wouldn’t be banned. Sinclair, the researcher, says this tactic doesn’t actually work. If the app was banned only in the U.S., users would have to sign up for a non-U.S. iTunes account. But it’s also unclear if the ban would prevent Apple, a U.S. company, from offering TikTok in its App Store overseas.
“Some creators who rely on TikTok for their livelihoods would probably have to get a burner phone to keep TikTok working, but it’s certainly not impossible,” Sinclair says.
ByteDance has already shut down operations in other locations. In Hong Kong, the company chose to halt operations after China passed a new national security law that would make it more difficult for TikTok to do business there.
In India, where the country has the power to force service providers to block access to websites, government officials banned TikTok as part of a larger shutdown of Chinese-owned apps after a deadly border clash with China. TikTok’s app no longer shows up in India’s app stores and Indian users who already had the app downloaded on their phones now see an error message that delineates the company is "complying with the Government of India's directive."
A U.S. ban would be different. “There are laws on the books for pirated movies or child pornography, but if the U.S. wanted to do what India has done, they’d need new legislation and even then it might not stand up to a First Amendment challenge,” Lewis says.
Trump’s second executive order, issued on Aug. 14, gave TikTok 90 days to divest its U.S. business under a separate authority, citing a ruling by the Committee on Foreign Investment in the U.S. Experts say that order, which would take effect in November or later if extensions are granted, carries greater weight and more specificity, since CFIUS has broad powers afforded by Congress to unwind ByteDance’s 2017 purchase of lip-syncing app Musical.ly, which was later re-branded as TikTok.
TikTok declined to comment on the deal negotiations. In an interview last month with Bloomberg News, interim Chief Executive Officer Vanessa Pappas said TikTok will continue to operate its hit music video app in the U.S., whatever comes of the threatened Trump administration ban on its business. She said the company was exploring multiple paths forward, declining to provide more specificity.
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