Bill to Force Sale of TikTok Bundled into House Foreign Aid Package, Senate May Advance it This Week

The United States House of Representatives passed a national security and foreign aid spending package on Saturday with language that would require the Chinese technology firm ByteDance to divest its ownership of TikTok, or see the app banned. The legislation is expected to quickly advance and become law, but a potential TikTok ban will likely face legal challenges.

The measure is based on a bill that advanced out of the House last month, but was modified to give ByteDance up to a year to sell its stake in TikTok.

Senate leadership struck an agreement with the House to extend the divestment period from about six months to a year — including a nine-month period that can be extended three months by the president if a potential deal is in progress.

The legislation is expected to quickly advance through the Senate, with the first vote planned for Tuesday, according to Senate Majority Leader Chuck Schumer (D-NY). The spending package – with billions in foreign aid funding for Ukraine, Israel and Taiwan – is a priority for President Biden, who urged its quick passage by the Senate and said he will sign it into law.

A single senator could oppose and filibuster the bill making it more difficult, but still likely, to pass. Sen. Rand Paul (R-KY) opposes a TikTok ban, recently arguing that the new measure is censorship and bad for business with China.

Despite the potential ban, TikTok is unlikely to go away any time soon due to legal challenges. The company hinted it would file a legal challenge against a potential ban. TikTok successfully blocked a Montana law banning the app in a legal challenge, alleging the law violates First Amendment free expression rights. A similar argument was made against a Trump administration executive order to ban the app in 2020.

The Congressional measure may also face a legal challenge over Fifth Amendment due process rights to contest a forced divestment, according to a Congressional Research Service legal memo.

Legal challenges may also be filed by those who rely on the app as influencers or who use the app to promote their businesses.

A sale would also require Chinese government approval. After a sale, the app might look or function differently, as ByteDance might not provide rights to the recommendation algorithms, often referred to as the app’s “secret sauce.” With an estimated price tag of $100 billion, TikTok is still losing billions of dollars.

“The problem is that the Chinese government is unlikely to approve this type of forced… merger and acquisition,” Paul Triolo, an associate partner at consulting firm Albright Stonebridge, told CNBC in March.

TikTok and other companies operating in the US with Chinese ties face a difficult balance with pressure from both governments.

“While the US and other Western countries have imposed sanctions or restrictions… China itself has moved to favor state-owned enterprises in recent years, leaving little room for Chinese tech and private businesses to operate,” Bucknell University professor Zhiqun Zhu recently told the Associated Press.

Chinese diplomats were recently dispatched to Capitol Hill to lobby against a potential ban of TikTok, according to a Politico report. The meetings were organized by the Chinese Embassy in Washington, which did not mention TikTok in most of the outreach. The company said it was unaware of the meetings.

And, TikTok is preparing to remove US-based general counsel Erich Andersen, who is presently in charge of years-long talks with federal agencies to show the company is taking sufficient data security measures and is able to prevent China from influencing content recommendations, according to a Bloomberg report.

Critics argue passing the legislation would create a bad precedent for an open internet and global competition. While the measures only calls out TikTok and ByteDance by name, it could apply to many foreign-owned or operated online services and platforms.

Supporters of a ban say ByteDance could be forced to provide US user data to the Chinese government under the country’s national security laws. They also raise concerns that China could influence the app’s algorithms to push propaganda.

There is no evidence China has directly influenced TikTok algorithms, but Chinese state news outlets have pushed paid promotions on the app in Europe and ByteDance employees can manually promote certain posts, according to Forbes reporting. A US intelligence report released last month cautioned that China may attempt to influence the 2024 election, and that it used TikTok accounts (among other platforms) to target candidates from both parties in 2022.

Senators Richard Blumenthal (D-CT) and Marsha Blackburn (R-TN) recently called for information about TikTok’s national security risks to be declassified, so that TikTok users might understand the risks.

Many argue the fears raised around TikTok will not be addressed with a potential ban or divestment. “Washington is correct to deal with the immediate risks posed by the single chess piece of TikTok, but it should also see the whole board and plan for the next 20 moves,” my colleague, Stanford Internet Observatory founder Alex Stamos, argued last year.

Sen. Ron Wyden (D-OR) said he supports a divestiture, but is not in favor of a potential takeover bid by former Treasury Secretary Steven Mnuchin, who now represents a group of private investors.

A measure preventing the sale of US customer data to foreign adversaries is included in the foreign aid and national security package, but a national privacy law is still in draft form.