Bill that would force TikTok divestiture gets closer to becoming law

Getting users and creators to lobby on its behalf didn’t help TikTok’s parent company make new friends in Washington.

What happened: The U.S. House of Representatives voted to pass a fast-tracked bill that would force Beijing-based ByteDance to divest TikTok. Lawmakers who voted “yea” worry that the Chinese government could make the company turn over TikTok’s troves of user data or exert its cultural influence on public opinion.

What’s next: The bill is off to the Senate. If it’s passed there — which isn’t certain — it goes to President Joe Biden, who has promised to sign it into law. There are three scenarios for what happens after that.

  • ByteDance divests TikTok globally, spinning it off as a stand-alone company.
  • ByteDance divests TikTok only in the U.S., creating two versions of the app. Losing over 150 million American users would be a blow for ByteDance, especially since “TikTok U.S.” would also be stiff competition for users from other countries.
  • ByteDance refuses to divest, and TikTok is banned in the U.S. as a result.

Why it matters: TikTok is wildly influential in sectors from technology and business to culture and politics. If the bill passes and the inevitable legal challenge from ByteDance fails, any of the above scenarios could change that influence, or put it under someone else’s control.

Zoom out: People like Kevin O’Leary and former Activision CEO Bobby Kotick want to buy TikTok, but that’s easier said than done. ByteDance was valued at over US$223.5 billion last fall, so buying TikTok — or even a stake in it — will be pricey, even if ByteDance eats a loss.

  • Big tech companies could afford it, but likely won’t want to deal with the antitrust scrutiny. Even competitors like Meta are more likely to let a divestment/ban play out in hopes that former TikTok users come to them.
  • ByteDance could offload control of TikTok with a stock swap, also likely at a loss, or an IPO, which is unlikely to be finished before the bill’s six-month deadline.

In Canada: An ISED Canada spokesperson told Peak Tech that the government is following the bill’s progress, but any reviews of TikTok it may or may not be conducting are confidential.