United States House of Representatives Passes Tiktok Divestiture Bill
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Legal Development 28 March 2024 28 March 2024
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Asia Pacific, North America
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Technology risk
On 14 March, 2024, by a vote of 352-65 acting on a bipartisan basis, the United States House of Representatives passed the “Protecting Americans From Foreign Adversary Controlled Applications Act” (the “Act”).
The Act specifically references Tiktok, and would force its owner Bytedance to divest of Tiktok in the United States within 6 months or face a wholescale ban in the United States. The Act must pass the Senate in unaltered form in order for the Act to be sent to the President for approval. Bytedance has the legal right to challenge the validity and constitutionality of the Act, most likely on the grounds of the First Amendment right to freedom of speech. President Biden supports the passage of the Act.[1]
A key component in any divestiture of Tiktok in the United States is the ownership of the algorithms that power Tiktok. On 21 December 2023, the PRC updated its export controls regime to specifically include personalized algorithms based on large data sets[2], which would allow the PRC to block the transmission of Tiktok’s algorithms from the PRC to any potential U.S. acquirer. This could significantly diminish the economic value of Tiktok to potential suitors if the algorithms are not allowed to be transferred.
For more information on how we can help you navigate US-China tensions, please contact Charles Wu at Charles.Wu@clydeco.com
[1] Reuters: US House passes bill to force ByteDance to divest TikTok or face ban, 14 March 2024.
[2] The specific PRC export control item is as follows (translated from Chinese): Personalized information push service technologies based on data analysis (personalized user preference learning technologies based on the continuous training and optimization of big data, real time perception technology of user personalized preferences, information content feature modelling technology, user preferences and information content matching analysis technology, large-scale distributed real-timing computing technology used to support recommendation algorithms, etc.
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