President Biden Signs Bill Mandating ByteDance to Divest from TikTok Within Nine to Twelve Months to Prevent U.S. Ban

President Joe Biden signed a bill on Wednesday mandating TikTok’s Chinese parent company, ByteDance, to divest from its U.S. operations within a year or potentially face a nationwide ban. This move escalates tensions over the fate of the popular social media app.

Why it matters:

The legislation sets the stage for a potential legal battle, as TikTok has vowed to resist the forced sale. The Biden administration had previously warned of a ban if ByteDance didn’t relinquish its stake in the U.S. version of TikTok.

Concerns about TikTok:

Critics of TikTok have expressed concerns over the app’s handling of U.S. user data due to Chinese laws that compel companies to share information with the government. TikTok contends it operates independently and safeguards U.S. data through its partnership with Oracle, which provides data firewall protections.

Former President Trump initially championed the push to ban TikTok, but his stance on the matter has since evolved.

Details of the new law:

The legislation grants ByteDance nine months to arrange a sale of TikTok’s U.S. operations, with President Biden having the option to extend the deadline by an additional 90 days if substantial progress is made. Failure to comply within the stipulated timeframe could lead to TikTok’s removal from U.S. app stores.

TikTok’s possible next steps:

According to the Wall Street Journal, the Chinese government has indicated it would likely block any forced sale of TikTok by ByteDance, potentially leading to a U.S. ban. TikTok’s CEO, Shou Chew, has pledged to challenge the new law, citing First Amendment rights.

TikTok might also await the outcome of the upcoming presidential election, hoping for a policy shift. If TikTok is sold to a U.S. buyer, ByteDance could retain its algorithm, altering the platform’s core appeal.

Implications for the broader market:

A forced sale or ban of TikTok could establish a precedent that disrupts the U.S. media landscape. It may also encourage other countries to mandate American firms to divest their local operations or transfer them to foreign entities.

Moreover, the broad wording of the new law could potentially impact ByteDance’s other apps beyond TikTok.