TikTok has a tricky legal case to make against the ban law

After failing to stop a bill that could ban TikTok in the US unless it separates from its China-based owner ByteDance, the company now faces two big hurdles: the US judicial system and the Chinese government.

TikTok has promised to bring a legal challenge against the law that was signed by President Joe Biden on Wednesday, which requires ByteDance to divest the app within a year or face an effective ban in the US. Experts expect its main arguments to center on alleged violations of its own First Amendment rights and those of its 170 million US users. But it won’t be an easy fight since judges often hesitate to make decisions of national security importance where the legislature has so forcefully weighed in. 

If the law stands, ByteDance will have to consider selling TikTok. But that’s not a decision it will be able to make entirely on its own. Due to export restrictions on technology developed in China, the company would need the Chinese government’s permission to sell the software that powers its recommendations and keeps users scrolling through the app for hours on end — in other words, what’s popularly described as its algorithm. 

ByteDance might be able to sell things like the brand, content, and user base with a lesser level of oversight, though even that remains a question. And all of those things are far less valuable without the algorithm.

While TikTok hasn’t yet revealed how it plans to challenge the law, experts anticipate its arguments will largely hinge on the First Amendment, and the company has hinted at free expression issues in its messaging. In a video addressing TikTok users after Biden signed the foreign aid package that included the legislation, TikTok CEO Shou Chew called it “a ban on TikTok and a ban on you and your voice.”

TikTok would likely argue that the divest-or-ban law places an unacceptable restriction on its own rights to free expression and that of its users, who might separately or jointly file suit over the law. Jameel Jaffer, executive director of the Knight First Amendment Institute at Columbia University, said in a statement the law is “unconstitutional” because “[t]he First Amendment means that the government can’t restrict Americans’ access to ideas, information, or media from abroad without a very good reason for it—and no such reason exists here.”

The missing piece many members of the public have waited for is clear evidence of the kinds of risks to US TikTok users that lawmakers have seen in their classified briefings, especially since those briefings seem to have convinced them to vote for the bill. But the public has remained in the dark about the specifics of the national security risks that the intelligence community believes are generated by the app.

“We’ve remained publicly unaware or uneducated on what exactly the national security implications are in this case,” said Gautam Hans, associate director of the First Amendment Clinic at Cornell Law School. “That does not mean that I don’t think that such concerns exist. It’s just that we are taking it on as an article of faith.” That said, Hans added, “courts are very reluctant to end up micromanaging or second guessing the decisions of the political branches when it comes to national security because of institutional competence reasons, the belief that judges are really not the best people to be making calls about national security.”

But, he acknowledges, that can also create a perverse incentive where “the government can constantly scream national security, national security, and therefore just prevail without any meaningful review.”

Ultimately, the court will have to weigh the supposed speech restrictions against the government’s national security claims, pitting two typically powerful legal arguments against each other. “Traditionally, First Amendment claims tend to be very persuasive to courts, and traditionally, national security claims also tend to be very persuasive to courts,” Hans said. “And if this case gets litigated, I think we’ll have at least one data point on which is, in fact, more persuasive.”

One significant factor in the outcome of TikTok’s legal challenge is that it’s only allowed to bring a complaint in the DC Circuit Court, which is a court of appeals. The law specifies that court has “exclusive jurisdiction.”

The DC Circuit Court has exclusive jurisdiction over many aspects of federal administrative law, such as immigration law and some tax law. Dealing with challenges to the federal government is par for the course in this circuit. “This is a court that’s going to take the issue seriously and apply Supreme Court precedent in a serious way,” said Matt Schettenhelm, senior litigation analyst at Bloomberg Intelligence covering tech and telecom. “You won’t have the situation where maybe a judge could get this case and try to make a name for himself by writing a bold First Amendment decision, for example, that pushes the limits.”

Schettenhelm predicts a win for the government in the circuit court. “At this point, I put it at a 70 percent chance that the United States can overcome what I think will be a First Amendment lawsuit brought by TikTok and its users,” he says. While he believes there’s a “serious basis” for First Amendment claims by TikTok and its users, he expects the court “to act deferentially and tread carefully before it overturns a policy decision that was adopted by an overwhelming bipartisan majority of Congress.”

The government’s case does have a weak point: it must show that Congress adequately explored alternatives that could have lesser implications on speech. “Often, the DC Circuit is asking, ‘Did the federal government or the agency take a hard look at the evidence in the record and use it properly?’” Schettenhelm said. 

“I think Tiktok will push on this point and say Congress should have done more to explore alternatives, should have built a better record,” Schettenhelm said. “At the end of the day, though … I think the United States probably can get by by saying this is a rational, common sense policy decision that’s motivated by national security concerns. And that’s going to be a hard thing for judges who aren’t experts on that topic to second guess.”

Courts tend to apply a greater level of deference to congressional actions, especially on national security — this is a much more weighty undertaking than the Trump administration’s attempt to enforce a ban via executive order.

There are also longstanding rules about foreign ownership of broadcast television and radio stations — rules the government may try to lean on to support the idea that preventing a foreign power from owning influential media products can overcome a First Amendment challenge.

While Schettenhelm sees the First Amendment claims as TikTok’s “best bet” in court, he anticipates the company will also claim the legislation is a bill of attainder, or a law that violates the Constitution by singling out an individual or company to punish them without due process. But he thinks that argument will fail, referencing a 2018 DC Circuit Court decision upholding Congress’ decision to codify a prohibition on Russia-based cybersecurity company Kaspersky Lab’s products in government information systems, based on concerns that the Russian government might gain access to US systems. The circuit court agreed with a lower court that it was not a bill of attainder since “the prohibition is not a punishment but a prophylaxis necessary to protect federal computer systems from Russian cyber-threats.”

ByteDance likely won’t want to consider potential buyers until it’s exhausted other options, but it might need to act sooner. Schettenhelm says that the DC Circuit Court rarely grants stays or preliminary injunctions that could stop the clock for the impending deal deadline. It’s more likely to take up a case in an expedited fashion, he says, which would let the deadline keep inching closer as it aimed to deliver a ruling by what Schettenhelm predicted would be the end of the year. 

Since the case would start at the appeals court level, it could only go to the Supreme Court from there. The initial nine-month divestment period would run out in mid-January, and the bill requires the president to see some progress in order to grant an extra 90-day extension.

If TikTok wins at the appellate level, the clock would stop, and if the Supreme Court took up the case, it would likely drag on another year or two. But if the government wins, Schettenhelm says, the Supreme Court might be inclined to let that decision stand, in which case ByteDance would need to act fast to figure out if a sale is viable.

“It would be negligent of TikTok not to be pursuing this on two tracks right now at the same time,” Schettenhelm said, “both pursuing a First Amendment case to try to stop it, but at the same time, exploring a potential sale. Because there’s just not enough time to litigate first and then think about a sale second.”

That brings TikTok and ByteDance to their next question: whether — and what — the Chinese government would let them sell.

For two experts on international business and US-China relations, the answer is that any sale is likely to be limited, if allowed at all in the first place. “I believe China will not agree to the sale of TikTok, the USA platform, because it probably feels at this point that they’ve got a gun to their head,” says Arthur Dong, teaching professor at Georgetown University’s McDonough School of Business who specializes in US-China relations and international economics. “Given their past history, they usually don’t respond to events that force them into accommodating an action on the part of the US government.” Dong anticipates the Chinese government will use the algorithm “as a lever in which to manage and limit the options available to ByteDance. So even though ByteDance is a private company, it still has to conform to a great deal of state influence.”

Long Le, who teaches international business at Santa Clara University’s Leavey School of Business, laid out three scenarios for ByteDance. The least likely one is for the Chinese government to allow ByteDance to sell TikTok along with its algorithm. Another option is that the government refuses a sale altogether. And a third is that they OK a sale of TikTok assets but without the algorithm.

Le said it seems to him that the Chinese government is somewhat keeping its distance, giving ByteDance leeway to explore a possible sale. The upcoming presidential election may also be a major strategic consideration since a shift in the US political landscape might very well change China’s relationship with the States. “They can say, ‘Okay, go ahead and explore.’ And then a year later, depending on how things pan out, the government can either say, ‘Okay, you can sell it without the algorithm,’ or they can say, ‘You can’t sell it at all,’ depending on the current political situation a year from now,” Le said.

“They’re hedging,” Le added. “There’s no need for China to play a hard game until they’re forced to.”

ByteDance executives are in no position to go around the Chinese government, according to Dong. “The founders of ByteDance will come under heavy, heavy governmental scrutiny, including the possibility of criminal charges, given the nature of the Chinese legal system. And so I think they are in a position where they can’t offend Beijing in any way, and they must comply with whatever Beijing informs them to do.”

Using export controls to limit the flow of proprietary technology is, of course, not unique to China. “China’s just borrowing a page from the American playbook of how to have a high degree of influence over how a China-based technology is exported and sold around the world,” Dong says.

While ByteDance may consider selling without its algorithm to avoid the export controls, Dong and Le say even that option might be limited. Even though a homegrown success story could stand to make billions with the sale of the app with the algorithm in tack, they say the Chinese government is not really motivated by money in that way.

“I don’t believe it motivates them one bit,” says Dong. “It definitely motivates the owners and the founders of ByteDance because they’re entrepreneurs, and they would love to maximize the value of this property sale. But ultimately, the Chinese government is not going to be motivated by just the fact that a lot of money’s being dangled in front of ByteDance for the sale of this company.” 

He pointed to China’s engagement with Russia during its war with Ukraine as evidence of this. “Their continuing support of Russia in the Ukraine war, despite the fact that their economy is going into a tailspin and American investment and American trade has been restricted, certainly indicates to the rest of the world and certainly to the United States that money is not the only motivation in terms of what drives our foreign policy and our domestic policy,” Dong said.

“They’re okay with ByteDance and TikTok making a lot of profit, but not in an extreme way,” Le said. He gave the example of Alibaba founder Jack Ma, who suddenly retreated from the public eye a few years ago after he publicly criticized Chinese regulators, prompting scrutiny about his whereabouts (he’s more recently reemerged publicly). Alibaba is one of China’s most successful companies.

This disinterest in profit could wind up being read as nefarious intent. If China refused to let ByteDance sell TikTok, it could add fuel to the claims that the Chinese government was using it as a propaganda tool. “If TikTok is really just a harmless video app, then the Chinese government should want to view it as a massive business success story and take validation in it being sold to an American owner for a really high price,” said Adam Kovacevich, founder and CEO of center-left tech industry group Chamber of Progress. “But if they resist that, and if they say, ‘No, we’d rather it not operate in the US than have it be sold,’ it suggests that they’re not interested in having a Chinese homegrown, global success story.”

There’s also the question of how China might respond to the law with actions toward US businesses. Kovacevich says he’s not too concerned about retaliation against US platform businesses that back his organization, like Meta and Google. That’s because Chinese censorship laws have kept US platforms from freely operating there for years. 

But companies like Apple and Tesla, which have big operations in China, could be impacted, said Le. “Once you put national security issues as the reason why you want to force a sale, then China could do the same thing,” he said.

“China usually responds tit-for-tat,” Dong says. “Just imagine that China now turns around and says to McDonald’s, ‘I want you to sever and separate your ownership of the China operations, and it must be 100 percent controlled by a Chinese entity. Otherwise, we’re gonna ban you from this country and force you to shut down all your outlets.’” Dong says American companies in China have known for a long time the risks of operating there and have likely developed plans to manage that risk or even scaled down their presence. Still, the fallout could be enormous. 

If the Chinese government does take action against some US businesses, that could lead to a dangerous game of brinkmanship. “You’re creating a divide where countries and companies have to pick whether they want to side with the US or with China,” Le said. “So you’re basically creating a tech Cold War.”