Dem
47
GOP
53
Congress passed a law, with bipartisan support, saying that if ByteDance, the Chinese company that owns TikTok, doesn't sell it to an American company, it will be phased out in the U.S. Naturally, ByteDance sued. On Friday, the Supreme Court held oral hearings on the case. ByteDance argued that its First Amendment rights were violated by the law. The justices were skeptical. Amy Coney Barrett said that the law doesn't require TikTok to be shut down, only sold to an American company. Elena Kagan said that the law targets a foreign corporation and foreign corporations do not have any First Amendment rights. John Roberts said that Congress isn't banning any particular kind of speech on TikTok. The site can host any content it wants to, so the First Amendment isn't in play here. Ketanji Brown Jackson said that Congress is not preventing TikTok from saying what it wants to. It is objecting to the ownership structure.
You can never really tell how the justices will vote based on their questions, but there was a lot of concern about ByteDance being ordered to hand over all its data on Americans to the Chinese government, which then could potentially blackmail some Americans that they want to control.
TikTok's lawyers argued that TikTok was being singled out for no good reason. Other Chinese companies, like Temu, also collect data about millions of Americans and there are no laws ordering them to do anything. The lawyers also argued that TikTok was so expensive that no American company could afford to buy it. However, it doesn't appear that the justices were impressed.
The law takes effect on Jan. 19, and it is likely the Court will issue an opinion on or before that date. Suppose it rules that the law is constitutional. Then what? Within minutes of the ruling, the TikTok app will permanently disappear from the Apple and Google app stores. No new downloads and no updates. Also, the telecom companies will be required to block the website. The app will continue to function initially. However, since it won't be upgraded anymore, as new versions of iOS and Android come out, the app won't be updated to work with them and it could happen that some change to one or both of the operating systems make it not work at all.
If that actually happens, ByteDance might finally consider selling to a U.S. company—and probably for a price much lower than it wants. At that point, its choices are just let it waste away and die off or get some money by selling. In the past, Walmart, Microsoft and Oracle have expressed potential interest in buying it. If they end up being the only bidders, TikTok would have to simply accept the highest bid, even if it were lower than what they think it is worth. The bidders know this, too, which could affect how much they bid.
One potential buyer is a consortium led by billionaire Frank McCourt, the former owner of the Los Angeles Dodgers. He is putting together a collection of private equity investors, millionaires, and billionaires, and is talking about making a $20 billion bid, without the algorithm that decides what content a user should be shown. What makes the company valuable, though, is not the algorithm, but the established user base. If McCourt or any of the American companies were to buy TikTok without the algorithm, they could hire a team of software engineers, psychologists and interface designers to make a new algorithm. It might not be as good as ByteDance's at first, but it would improve over time. As long as the users didn't give up en masse and go elsewhere, the company would still be valuable.
Could Donald Trump play a role here? Maybe. The law says the president can extend the deadline by up to 90 days if there has been progress on a sale. On Jan. 20, Trump could say to ByteDance: "How much is it worth to you for me to give you another 90 days?" Depending on what they were willing to pay him, he might or might not give the app a 90-day reprieve. Also, Oracle's cofounder, billionaire Larry Ellison, is a longtime Trump supporter. Ellison is not shy about anything, and is surely not shy about giving Trump advice on how to proceed here.
Another factor is the Chinese government. It has said that if the sale includes the algorithm that shovels content at users, it would block the sale. It is not clear to us that the algorithm is so central here. Again, we think that getting the existing user base of 170 million Americans is the biggie. (V)