No Turning Back the Clock for TikTok and its Broader Business Ramifications

The United States (U.S.) government (USG) has long wanted to enervate TikTok, which hosts short-form videos and whose owner is China’s ByteDance. USG and subnational efforts have come in the form of Presidential Executive Orders, Committee on Foreign Investment in the United States (CFIUS) divestiture orders, proposed legislation in the US Congress, limitations by states like Montana and Texas, and restrictive measures at universities. These actions would or have banned TikTok from app stores and terminated their access to internet hosting and content delivery services, prevented employees from using the app on government devices, and blocked the app from official networks. The most high-profile, recent initiative is the “Protecting Americans from Foreign Adversary Controlled Applications Act,” which passed the US House of Representatives by a wide margin.[1] This “Hot Topics, Cool Analysis” piece discusses the roots of anti-TikTok machinations, the pushback against these efforts as well as some facts justifying concern, and the implication of US maneuvers for businesses.

The drivers of anti-TikTok angst are manifold. There are fears about potential Chinese government access to user data, espionage and blackmail, and disinformation campaigns. There are worries, too, about Chinese government censorship as well as use of the app for targeting. Furthermore, there are fair economic competition concerns.[2] Domestic and international political considerations are hardly absent. For some, suppressing TikTok is a way to demonstrate their China hawk credentials.[3] For others, it is yet another way to blunt the China threat. Pushback has assumed many forms. On the constitutional/legal front, it has been argued that USG and state measures exceed the authority granted by the International Emergency Economic Powers Act, violate the US Constitution’s First Amendment protections of religion, speech, and association, and/or fail to reduce risks in the least burdensome, necessary way.[4] On the economic front, the TikTok coalition has stressed the app’s 170 million strong audience, creation of hundreds of thousands of jobs (directly and indirectly), and benefits for 5 million small businesses as well as artists and content creators.[5] TikTok/ByteDance and China have not been idle. The former spends millions annually on lobbying and even ran a campaign sending app users pop-ups telling them to call members of Congress to oppose anti-TikTok legislation.[6] It also has proposed a multi-billion dollar setup (“Project Texas”) that involves storing data in the US and preventing TikTok and ByteDance employees outside the US accessing it.[7] The latter derides American maneuvers as anti-consumer, political theater, and protectionist and warns they will deter Chinese investment in the US.[8] Others have noted that removing TikTok from the scene would further ensconce dominant platforms like Meta, which, in turn, would decrease competition and innovation.[9] Yet others stress that the problem is not TikTok per se, but rather the US’s abysmal data protection laws and that Washington needs to focus on the whole.[10]

Reports do indicate TikTok has some problems protecting user data, has been used in ways critics have warned, and remains ultimately beholden to China.[11] For example, it has been revealed that TikTok employees exploited user data to spy on US-based journalists.[12] In addition, a New York Times exposé in May 2023 documented that highly personal user information was made widely available on “Lark,” an internal messaging and collaboration tool used by ByteDance employees, including those in China, and that Lark data was stored on servers in China.[13] In its annual national security threats assessment, the U.S. Office of the Director of National Intelligence reported that Beijing is using TikTok for propaganda and election interference purposes.[14] TikTok’s aforementioned pop-up campaign only highlighted for many in Congress TikTok’s potential for disinformation and political interference.[15]

Though they have said nothing publicly, American firms likely have mixed feelings about USG moves against TikTok. On the one hand, those hosting the TikTok app, providing services to TikTok (e.g., Oracle), or getting clickthroughs from TikTok (e.g., Amazon) could lose. American firms in China also might face retaliation. Similarly, companies using TikTok would have to shift to or redo their ad campaigns for new platforms, potentially incurring high costs or losing market share or followers in the process.[16] On the other hand, competing social media platforms like Meta, Snap, and Spotify might gain, a prospect former President Donald Trump divines and denounces.[17] Perhaps the silent are just waiting for clarity. After all, the prospects for US Senate passage of an anti-TikTok bill are uncertain; the history of past US initiatives against TikTok has not yielded any basis for worry, and there will be years of litigation and Chinese government opposition to any divestiture.[18] In any event, speaking out for or against TikTok could alienate the powers-that-be in Washington or Beijing. As for American firms, many are subject to the same criticisms thrown at TikTok so perhaps the idiom “those in glass houses shouldn’t throw stones” is shaping their responses. Even so, some industry associations have not shied away from voicing concerns about the implications of limits on TikTok.[19]

The campaign against TikTok is likely to continue. Therefore, businesses, large and small, should embrace, as banal as it is, the adage “don’t put all your eggs in one basket.” Artists, companies, and creators should diversify their advertising, hiring, and operations locations. Efficiencies and, perhaps, quality, may be lost, but there will be gains for risk management and strategic planning. Businesses also should support USG laws and regulations that give them greater bargaining power against the tech behemoths that so dominate social media.

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