TikTok chief Shou Zi Chew, centre. Photo / FT montage, Getty Images
The day after American lawmakers voted overwhelmingly to force the Chinese owner of TikTok to sell the video-sharing app, its chief executive Shou Zi Chew expressed confusion.
“There’s a lot of noise,” Chew exclaimed on Thursday during a visit to Capitol Hill. “But I haven’t heard exactly what we’ve done that is wrong.”
It was a strange comment because lawmakers have been explicit about their concerns that a Chinese company, ByteDance, owns what has become the social media site of choice for America’s teens and young adults.
The FBI and US intelligence agencies are worried about everything, from China obtaining Americans’ personal data to using the app’s algorithm to help spread disinformation and meddle in US elections.
Chew was also told directly by lawmakers what they felt was wrong in March last year, when he was grilled on Capitol Hill amid soaring tensions between the US and China.
The House of Representatives on Wednesday finally acted on those concerns by voting 362-65 to approve a bill which would ban app stores from distributing TikTok unless ByteDance divests the popular video-sharing platform within 180 days. Chew decried the outcome, which had support from both Republicans and Democrats, as “very disappointing”.
The Senate must now decide whether to take the measure up, and it remains unclear how it will act. But President Joe Biden has said he would sign the bill if it reaches his desk, in a comment that surprised some because his presidential campaign is using TikTok to reach younger voters.
TikTok contends that the House bill is unconstitutional, and insists it is not controlled by the Chinese government. But some critics argue that a Chinese-owned app should not be allowed to operate in the US, in the same way that there are restrictions on foreign ownership of legacy media such as newspapers and television stations.
It is not only national security that concerns some critics. More and more Americans get their news from TikTok, and some say this gives it undue influence. Jewish groups in the US, for example, accuse it of giving pro-Palestinian voices more prominence in its algorithm than pro-Israeli ones as the war in Gaza has unfolded.
TikTok “is the 24/7 news channel of so many of our young people”, said Anti-Defamation League CEO Jonathan Greenblatt in an interview late last year, “intensifying the antisemitism and the anti-Zion[ism] with no repercussions.”
While Chew maintains that he does not know what TikTok has done wrong, a number of people inside ByteDance feel let down and deceived by the chief executive and others involved in devising a strategy that has opened the door to the app becoming the successor to Huawei, the Chinese telecoms giant largely drummed out of the US market over national security concerns.
“Our strategy was wrong,” says one ByteDance insider, who says the company’s general counsel, “went into a black box, played defensive and failed to come up with a more proactive strategy.” Chew, they add, “was stubborn or oblivious about what was coming”.
The immediate question for TikTok is what the Senate now does.
Chuck Schumer, the Democratic Senate majority leader, has not said yet whether or how the upper chamber of the US Congress might take up the bill. But the large majority in the House — and rare bipartisan support — give it significant tailwinds.
TikTok had itself helped create some of the momentum behind that support.
Over the week leading up to the vote, many politicians were furious when TikTok used its own app to help subscribers register complaints with their congressional representatives.
House lawmakers also received a series of classified briefings by intelligence officials that observers said helped boost support for the bill. Senators will receive similar briefings over the coming weeks, which will help determine the way they vote.
Already several key senators have come out strongly in favour.
Mark Warner, the Democratic head of the Senate intelligence committee, and his Republican vice-chair Marco Rubio said in a joint statement that they “look forward to working together to get this bill passed through the Senate and signed into law”. John Fetterman, the progressive Democratic senator for Pennsylvania, and the hawkish Republican Josh Hawley of Missouri also joined calls for the bill to be tabled soon.
Schumer himself has previously supported calls for divestment. “A US company should buy TikTok so everyone can keep using it and your data is safe,” he wrote on social media in 2020.
But it’s not clear whether the senators ready to support the measure number 60, the figure that would make it immune from some procedural mechanisms to block its passage. The libertarian Republican Rand Paul opposes the bill on free speech grounds, as do some Democrats. Republican Mike Lee of Utah deplores it as executive over-reach.
The more complicated path in the Senate has convinced TikTok’s top executives that senators will not back the House bill. “It looks like it’s gonna die in the Senate,” says one person familiar with the Chinese company’s strategy. “And if it doesn’t die in the Senate and it gets signed into law, ByteDance will definitely go the legal route.”
The company has been down this road before. In 2020, then President Donald Trump issued an executive order to block TikTok from operating in the US and gave ByteDance 90 days to divest from its American assets. The company challenged the order in the courts, and it was blocked hours before coming into effect.
Trump last week came out in opposition to the legislation, partly because he says it would help Facebook, which banned him from its platform for two years.
TikTok’s supporters hope Trump might move the needle in their favour. Some ByteDance investors have contacted Trump’s presidential campaign to present data that highlights how popular the former president is on TikTok compared with his election rival Joe Biden, according to the person close to the company.
“Trump’s people have definitely been shown a bunch of data from TikTok about how he’s outperforming Biden and he obviously loved that,” says a person familiar with TikTok data. The Trump campaign did not respond to a request for comment.
Some believe the company might have avoided this completely had Chew made similar overtures to his most hostile critics after testifying before Congress in March last year. “What you needed to do was get people like [Republicans] Ted Cruz and Marco Rubio to come out and claim victory by offering them a deal that they could claim as a victory,” says the ByteDance insider.
The company’s aim now, says another person close to ByteDance, is to “kick the can” down the road until, it hopes, Trump returns to the White House in 2025.
Until then, the bigger question that will loom over TikTok is whether it could be sold — and to whom.
Microsoft held talks with TikTok about a deal in 2020, but they collapsed. Later Oracle and Walmart reached an agreement to buy its US operations but the deal was shelved after the Biden administration decided to review the transaction.
The Chinese government has made clear that it does not want ByteDance to divest TikTok, and most people close to ByteDance insist that the company will not sell even if Congress tries to force it.
But a revival of the Oracle deal might not be out of the question if Trump, who is close to its executive chairman Larry Ellison, returns to power.
Steven Mnuchin, an investor who served as Trump’s Treasury secretary, also said on Thursday that he was pulling together a group to buy TikTok.
The company does not disclose numbers, but US revenue was $16 billion (NZ$26.3b) in 2023 out of a worldwide total of $120b, according to five people familiar with its operations.
Investors in ByteDance face months of further uncertainty, and are frustrated at how the parent company is handling the situation. One early investor, who maintains a significant stake in the company and knows Chew, says ByteDance “hasn’t communicated anything” about the state of play.
“They are a deeply uncommunicative company. We are trying to find out what is happening,” says the person. “Shou is trying to find out also, he doesn’t know what the hell they are doing. Their belief was that it would never get to this point, that’s what TikTok’s stance was. When I last spoke to Shou, he said it would never get this bad.”
While things are heading in a tough direction for TikTok in the US, there’s little evidence that the pressure will lead other countries to follow suit, in the same way that some American allies targeted Huawei.
TikTok denies the claims by US intelligence and security officials that it is a threat. It insists that it has set up a structure in the US, called Project Texas, which walls off the personal data of Americans from anyone in China.
But the company has previously had to concede that Chinese employees of ByteDance were able to access some US data in the past. FBI director Christopher Wray recently said on Capitol Hill that ByteDance would be required to hand over data to Beijing if requested because of Chinese national security laws that outline that obligation.
A TikTok spokesperson did not respond to questions about how ByteDance could deny such requests from Beijing.
For now, TikTok is banned on government devices in several countries beyond the US, including the other members of the “Five Eyes” intelligence-sharing network: Canada, Australia, New Zealand and the UK. In Britain, TikTok could also face problems because of a data protection law that will soon be debated in parliament.
India has banned TikTok from operating in the country because of geopolitical tensions between the two Asian powers. The company has faced criticism in other countries, including Italy, for content that is considered harmful to younger people. But talk about banning the platform has faced fierce resistance from politicians who use the app.
In Taiwan, a wave of disinformation and propaganda against the ruling Democratic Progressive party on TikTok prior to the January 13 presidential election has also triggered a fierce debate over how to counter the social media platform.
For those who work at TikTok, the situation in Congress has only added to the pressure on them. Morale was already low due to an ongoing internal reorganisation, according to multiple employees, but it has declined further as management has communicated little to them about the potential ban.
“The ship is sinking and all my colleagues are talking about how much our severance packages will be,” says one. “I would be happy if it were bought. Maybe it would be a better working culture that way.”
Written by: Demetri Sevastopulo in Washington, James Fontanella-Khan in New York, and Tabby Kinder in San Francisco. Additional reporting by Eleanor Olcott, Cristina Criddle, and Kathrin Hille.
© Financial Times
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