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The US House of Representatives has passed a bill with an ultimatum for TikTok’s parent company, ByteDance: sell the app, or be banned in the US.

Today on the Big Take DC podcast, Dan Flatley and Alex Barinka cover the national security concerns behind this bill and the potential geopolitical and tech industry consequences.

Listen to the Big Take DC podcast  every week.

Here is a lightly edited transcript of the conversation:

David Gura: The US House of Representatives passed a bill last week that would ban TikTok unless its Chinese owners sell the platform. And many of the app’s 170 million  American users… are not happy about it:

TikTok user: Oh, US government of America, you've made a big mistake.

TikTok user:  when it comes to banning, the [bleep] Renegade app is the one time that they decide to like, unite forces and come together?

TikTok user:  they look like bad Scooby Doo villains that need to retire, and I wish they would.

Gura: It’s not the first time lawmakers have gone up against this super popular app. Former President Donald Trump signed an executive order to ban it back in 2020, but it was blocked in court. And last year, Congress took up the idea of regulating it. But attempts to ban it outright have failed.

Now, renewed concerns have it back on the top of lawmakers’ desks.Today on the show, it’s the US government versus TikTok. 

Why is Washington picking this fight again… now? 

Does it really stand a chance of addressing the China-related national security concerns they’re worried about?

And could any version of that proposal actually work?

From Bloomberg’s Washington bureau, this is the Big Take D-C podcast. I’m David Gura. Saleha Mohsin is away promoting her new book - out this week - called “Paper Soldiers: How the Weaponization of the Dollar Changed the World Order.”

Alex Barinka: Depending on who you ask, the TikTok algorithm is either this hugely sophisticated, unique, powerful tech tool that is able to discern what you're interested in with the inside joke on the app being, it knows me better than I know myself… or as some lawmakers see it, it is an incredibly sophisticated spy device for espionage to collect information that I didn't even know about myself.

Gura: Alex Barinka is a tech reporter at Bloomberg, and she says … the very thing that makes TikTok users rabid for the app, is what the government is so concerned about. Its stickiness. 

Users love the app because it feeds them content that seems perfectly tailored to their interests… whether that’s a viral feta pasta recipe… or a puppy video.

Barinka: They spend upwards of an hour on the app every single day. It is absolutely an enviable asset to have.

Gura: That asset… the captive eyeballs — and data — of millions of American users … ultimately belongs to a Chinese tech company called ByteDance, which owns TikTok. Which makes many US lawmakers uneasy.

We’ve seen politicians, coming out of briefings with the FBI and the Justice Department, saying, essentially, “Trust us. This app is a problem.” But… “We can’t share the details.”

Barinka: Lawmakers and officials largely have thrown out a lot of hypotheticals, not a lot of specific evidence.

Gura: So I turned to Dan Flatley, a national security reporter at Bloomberg.

Dan, I want to ask you about the, the chorus of criticism or the concern that we're hearing from lawmakers. What are they saying about the specific risks they think this poses to national security?

Dan Flatley: Well, the, the number one risk is data security. So TikTok's parent company, ByteDance, is based in China, has ties to the Chinese government,  And there is a concern that the Chinese government could, at some future date, compel ByteDance to turn over whatever data it has from TikTok to the government. And then that data can be used with other types of data that China has collected, either through hacks or other forms of cyber attack, or just data that they've bought on the open market to profile people or to blackmail people or for some other purpose that we don't know about.

Now, TikTok, it should be noted, has always disputed this and has basically said, TikTok Incorporated is a U.S. incorporated company.  The data is walled off from any government. But that has done very little to assuage the concerns of members of Congress who just see a real threat there.

And then, of course, the secondary threat, um, or, or maybe the primary threat, depending on how you look at this is, is whether the app could be used in some sort of influence operation. 

Gura: The thinking goes: a foreign government, or some other entity, could use the app to push certain perspectives to US users to promote propaganda or misinformation. 

Flatley: Talking to folks on the Hill, one of the developments that really sort of galvanized a lot of support for this push was the aftermath of the October 7th attacks in Israel.

Gura: Since October 7, lawmakers have expressed concern that TikTok’s algorithm has been favoring pro-Palestinian content on the platform. On top of that: 

Flatley: It's an election year. So there's a lot of focus on the voters that TikTok is reaching. This is a very coveted demographic. A lot of potential young voters, a lot of young people and politicians are interested in reaching those kinds of voters.

Gura: It’s sort of a perfect storm, and one that brought lawmakers together, across the aisle, in this rare moment of bipartisanship.

Flatley: What you have, at least according to the folks that I've talked to, was a moment in which all parties are sort of worried about China. Some parties want to take a really hard line. There's potentially more of a concern from Republicans on kind of traditional national security issues with regard to China. There is a concern more from Democrats about misinformation and disinformation. TikTok sort of found itself right in the middle of that Venn diagram.

Gura: This led lawmakers to hit the gas on passing legislation to rein in TikTok. But unlike most previous TikTok bills, this time around, lawmakers didn’t immediately jump to a ban.

Could you walk us through this bill? I gather it's about a dozen pages long, but what does it spell out exactly? 

Flatley: Essentially, it spells out a process by which TikTok would be forced to sell itself to a US company or a company that's located in a, what we would call a quote unquote friendly country. So anybody but China essentially. But also you don't want to be sold to Russia or Iran. 

It would require Tiktok to do the sale within six months, otherwise it would face a ban in the US, so it would be blocked from app stores. It would be blocked from Internet service providers. You wouldn't be able to get any updates to it. Essentially, it would just sort of die of starvation because, you know, the back end stuff would no longer be able to happen.

Gura: In other words, this is an ultimatum to ByteDance. Congress is saying, “Sell off TikTok to a new owner, or … the US is going to ban the app.” 

Barinka: This bill moved incredibly fast. 

Gura: Tech reporter Alex Barinka again:

Barinka: This bill moved incredibly fast. From its introduction to its vote. It moved at a speed that we haven't really seen before or not in recent years with, with the makeup of Congress as it is right now.

Gura: TikTok  saw this happening, and it tried hard to slow this down. As lawmakers prepared to vote on the bill, the app sent out alerts, urging millions of users to call their representatives and “stop the TikTok shutdown.”

TikTok users made videos of their own, too. And that campaign … went viral.

TikTok user: Do you want to save TikTok?  Let me tell you a couple of things that you can do.

Barinka: We had lawmakers coming out to the steps of Capitol Hill the week this bill was voted on complaining about just the vast number of phone calls they were getting.

TikTok user: These people will listen to us because they want to keep their jobs. So let's make sure to spam their inboxes.

Barinka: But lawmakers also, particularly the ones who are critical of Tiktok, saw this as kind of just another way that TikTok has a hold over the minds and hearts of users.

Gura: Lawmakers like Republican Congresswoman Cathy McMorris Rodgers. She’s the chair of the House committee that advanced the bill. 

Cathy McMorris Rodgers: This morning, prior to our hearing, TikTok used its influence and power to force users to contact their representatives if they wanted to continue using TikTok.  

Gura: She basically cites that call-in campaign as evidence that TikTok needs to be stopped, and implicated the Chinese Communist Party, or the CCP.

Rodgers: This is just a small taste of how the CCP weaponizes applications it controls to manipulate tens of millions of people to further their agenda.

Gura: TikTok has done a few things to reassure lawmakers that American user data is safe. The company works with Oracle, a US-based tech company, to protect American user data from bad actors and foreign governments. 

They’re also taking another approach. Lobbying lawmakers directly. 

Barinka: I got to review one of the pamphlets they’re passing out to lawmakers defending themselves against some of the Department of Justice's claims. They say things like, ‘you think we share all this information? Well, that's just what every social media company shares, like name, email address, phone number. And by the way, TikTok doesn't ask you for your real name or your employment status or your relationship status, like some other apps do.’

Gura: It’s a lobbying push that actually aligns with what many tech critics and privacy advocates are saying. 

They’ve been trying to press the issue even further:

Barinka: To blow this up and actually say, “Hey, this shouldn't just be about TikTok. This should be about comprehensive data privacy policy.” TikTok behind the scenes has been fanning those flames saying, “Yes, we would love industry wide policy. Don't single us out.”

Gura: According to Alex, privacy experts think this is a fair point. She spoke to one named Calli Schroeder, who works at a privacy advocacy organization called EPIC:

Barinka: She said, look, if the internet is a colander, then banning TikTok from the US is like plugging one of those tiny holes and you're leaving all the rest open for data to kind of seep out. Not only from rivals who have had a litany of data breaches and kind of bad situations come up, but also from things like data brokers, these third parties that vacuum up hordes of information from the Internet and sell it to the highest bidder.

Flatley: It's very unusual to see a specific company named in legislation like this, and that actually has some members of Congress concerned.

You know, does this actually address the problem, or is this just kind of a band aid? Okay, today it's TikTok. Tomorrow it may be something else. Do we need to pass a piece of legislation every time this happens?

Gura: Whether it's a problem with TikTok alone… or with the entire social media environment... lawmakers have decided there is cause for concern.

But now that the House has passed this bill, it goes to the Senate. And if it manages to become a law… (which again, is a long shot) there are still HUGE questions about how to actually implement it. That’s coming up.

The US House of Representatives has given TikTok’s parent company ByteDance a warning: We want the app out of Chinese control, and we’re not afraid to force your hand. But that bill still faces some hurdles.

It’s already slowed down since landing on the Senate’s plate… and even if it does pass the Senate—which is, again, a long shot—and the president were to sign it… there is no indication that ByteDance or the Chinese government would give this up without a fight.

Here’s my colleague Alex Barinka.

Barinka: TikTok right now is valuable for China, probably because it's valuable for ByteDance. We know, according to our sources, that they aim to sell almost $18 billion worth of goods on the app in the US in its first year of operating TikTok shop. 

So when it comes to just like economic lift and having a parent company in ByteDance that owns some of the biggest apps in the world, it becomes really, really, really important.

Gura: The Chinese government has made it clear that it would have to be involved in any potential sale of TikTok. But it’s unclear who the U-S expects has that kind of cash lying around. 

Barinka: The bill itself doesn't specify what kind of sale or divestiture would make lawmakers happy. So I kind of tapped my old deals reporting hat. I used to cover M&A for us at Bloomberg, particularly in tech. And I think there are three specific options that I really see.

Gura: The first option is ByteDance would sell TikTok to a U-S company, or one that’s more friendly to the United States. 

Barinka: The problem with that is under the current administration, the antitrust regulator has been very, very tough on Big Tech. So when you think of the names that could afford a check of $35 to $40 billion dollars, which is what Bloomberg Intelligence values TikTok's US business at... the list is short. It's Meta. It's Alphabet. It's Apple. It's Amazon. It's all the names that the antitrust regulator would be hard pressed to, uh, to not get involved and block that kind of deal.

Gura: So that leaves the other two options: 

One’s a sale to private investors. (So, a group of venture capitalists.) Investors who would keep it in private control.

The other is … investors buy it, then take it public on the market.

Steven Mnuchin, the former Treasury Secretary, has already said he’d be interested in rounding up a group of investors to buy the app.

No matter who buys it, the bill specifies that the president would have to sign off on the sale. Of course, to get to this point, the bill would have to become law.

Barinka: Now, as we are recording this, it is March. The bill, if passed, would give basically six months for Tiktok to be sold or blocked. If this passes, say, in May, which would be pretty quick for this bill to get through the Senate, that would put that deadline in November, and this November is election season. So this timeline will be really important as legislators look at this bill and potentially continue to hear from users who are staring at their ballots, thinking about who they're gonna vote for, and thinking about who might try to snatch this app that they love from their hands.

David Gura: Which would make things tricky for President Joe Biden, whose campaign joined TikTok for the first time this year:

Barinka: They have been posting dozens of videos and clearly trying to reach an audience there. For the Democratic Party, young people have been incredibly important. In Biden's first election, young people turned out at record levels. In the last midterm election, some experts say that young Democrats blocked the prophesized red wave. So when you look at what Biden has to lose, it is those voters.

Gura: White House officials have said they want to see some changes to the bill, but President Biden has said he would sign it into law. Which could alienate some young voters.

There’s already been backlash against lawmakers who’ve targeted TikTok… particularly those who’ve used the app in the past, like one North Carolina Congressman…

Barinka: Jeff Jackson is currently in the US House of Representatives, but he is running for Attorney General in his state. He has been one of the most successful examples of a politician on TikTok, and he also voted for this bill. And after that happened, he has been just blasted on the app. 

Alex Barinka: He's lost over 100,000 followers of his 2. 5 million. And he's had to come out with a few response videos, basically trying to justify his decision.

Jeff  Jackson: I apologize. I did not handle this situation well from top to bottom, and that is why I have been completely roasted on this app in the last 48 hours…

Gura: TikTok users? They did not accept Jackson’s apology.

TikTok user:  Congratulations, Jeffrey Jackson. I'm officially giving you this award for the single dumbest video I've ever seen on the internet.

Gura: All this is to say, lawmakers are in a tough spot. Not just Democrats, who are scared of alienating young voters in an election year. Republicans, too. Former President Trump has come out and said he’s against the bill… even though he once tried to ban TikTok by executive order. Now he says, this bill would give Meta too much power.

Barinka: You'll remember after the January 6th insurrection, Facebook removed Donald Trump from the platform. He was off the platform for two years. So, perhaps there's a little bit of animosity there with Trump and Meta, which owns Facebook, but it is incredibly fascinating and honestly put a lot of Republicans in a bind. 

Gura: And that brings us to the very last wrinkle in this very complicated legislative picture.

If ByteDance and the Chinese government refuse to sell TikTok, the US government would ask American tech companies—like Apple and Google—to ban it from their app stores. That sort of ban might run into trouble with the Supreme Court.

Barinka: There is a really interesting legal argument that's come to the forefront. In 1965, there was a U. S. Supreme Court case where the justices voted unanimously that the First Amendment protects Americans' right to see and view communist propaganda. 

There was a moment where the post office was looking to block the sending of Chinese communist propaganda through the Postal Service, and that was protected by the First Amendment.

Gura: Alex points out, this kind of censorship of free speech, would be pretty draconian.

It’s worth noting: TikTok’s main competitor is Instagram Reels, a video product owned by Meta. So a TikTok ban would give Meta a lot of power over the market—as Trump pointed out.

Alex says, there’s also a compelling argument that a TikTok ban would hurt other American tech companies… by making the US look bad.

Barinka: The biggest social media companies in the world are American companies. And if America comes to the table and says, we're going to pluck this gem, this global gem in TikTok and force it to be owned by another American company, how does that look on the world stage?

Gura: All this is pretty unprecedented. Congress has never forced an international company to sell off part of its business.

And my colleague Dan says, they might not manage to do that this time around, either. The Senate famously slows down the legislative process…

Flatley:  I don't have a crystal ball, and I've gotten in trouble before trying to predict what Congress is going to do. But unless the Senate moves quickly on this, which there's no indication that they are at the moment. This is going to get bogged down in months and months of negotiations and nothing may ever happen with it.

Gura:  That's a safe bet, I think, as far as congressional clairvoyance, I think that's pretty good… [laughs]

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