Four years ago, when the Trump administration threatened to ban TikTok in the U.S., its Chinese parent company ByteDance Ltd. worked out a preliminary deal to sell the short video app’s business. Not this time.

Once again, the U.S. government is aiming to shut down TikTok unless it’s divested from Beijing-based ByteDance. But the company has made clear it has no intention of selling. Indeed, TikTok’s management vowed in an internal memo to staff “we will move to the courts for a legal challenge” if the bill winding its way through Congress is signed into law.

That sets the stage for a watershed legal battle between the U.S. government and the offspring of a $240 billion startup that’s come to define China’s growing technological muscle. The outcome could define the business landscape for Chinese companies like Tencent Holdings Ltd. and PDD Holdings Inc.’s Temu with growing U.S. ambitions. And it’s a test of how Beijing will respond to growing pressure on homegrown champions from ByteDance to Huawei Technologies Co. The proposed bill in fact deliberately calls out the potential to circumscribe apps from countries that count as foreign adversaries.

“It’s not just TikTok, since we saw the U.S. also took actions before against Huawei and now hundreds of Chinese companies are under U.S. sanctions,” said Wu Xinbo, a director at Fudan University’s Center for American Studies. “In the future, other companies like Temu and other commerce platforms could also be affected and U.S. allies may follow suit to ban TikTok as well. This may have a domino effect.”

The U.S. House of Representatives on Saturday put legislation requiring ByteDance to divest its ownership stake in TikTok on a fast track to become law. The Senate is expected to vote on the bill in coming days. President Joe Biden has said he will sign the legislation promptly. The legislation under consideration gives ByteDance almost a year to divest of TikTok. That deadline would mean TikTok would likely survive through the U.S. presidential election in November.

ByteDance has compelling reasons to take on Washington. For starters, it has a much bigger business in the U.S. than it did in 2020 — 170 million users now, up from less than 100 million then — and revenue far surpasses any other market.

Never miss an episode. Follow the Big Take DC podcast on iHeart, Apple Podcasts, Spotify or wherever you listen. Read the transcript.

Since Trump’s abortive assault, TikTok has also built up a fledgling e-commerce business that hinges on influencers hawking goods to young Americans. That’s linked it inextricably to swaths of the U.S. economy, from millions of content creators to small business owners that rely on the platform. It’s preparing to debut live shopping in Mexico around July, a person familiar with the matter said, taking it into a different part of the American continent. A U.S. ban could affect an international rollout more broadly.

U.S. lawmakers aren’t the only ones currently going after TikTok.

Across the Atlantic, European Union officials have also threatened the company with hefty fines and temporary curbs on part of its new TikTok Lite app, which was recently debuted in France and Spain. Regulators contend that TikTok Lite, which includes a rewards system for users, could be addictive to young people, and claims the company didn’t complete a full risk assessment.

...continued

©2024 Bloomberg L.P. Visit bloomberg.com. Distributed by Tribune Content Agency, LLC.