TikTok faces tough questions in court as it fights US ban

(Bloomberg) — TikTok faces an uphill battle to avoid a U.S. ban if its Chinese owner doesn't sell the hugely popular social media app, according to questioning by an appeals court panel.

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A three-judge panel of the U.S. Court of Appeals for the D.C. Circuit on Monday expressed skepticism about TikTok's argument that the law signed by President Joe Biden banning the video-sharing app would violate the company's free speech rights. The U.S. government argued that national security concerns about TikTok's Beijing-based parent company ByteDance Ltd. manipulating the content American audiences see justified the law.

“This argument has not sat well with TikTok,” Bloomberg Intelligence analyst Matthew Schettenhelm said after the hearing. “There is a real chance that the DC Circuit will uphold the law, which would make a last-minute Supreme Court appeal the only realistic path to avoid a ban by January 19.”

The ban is set to take effect on January 19, but TikTok has indicated it will take the case all the way to the U.S. Supreme Court. TikTok and the Justice Department have requested a decision from the DC Circuit Court by December 6. The parties could then ask the full court to review the case.

ByteDance, TikTok and a group of its users argued in court that the law violates the First Amendment and would undermine the free speech rights of its more than 170 million U.S. users. But suggestions by lawyers for TikTok and its content creators that the company should be allowed to continue operating in the U.S. fell on deaf ears with the judges.

“Suppose the United States is at war with another country and the question arises whether that foreign country can own a major U.S. media outlet during the war,” asked Chief Justice Sri Srinivasan. “Is your argument that Congress cannot prohibit enemies from owning a major U.S. media outlet?”

TikTok's lawyer, influential Supreme Court litigator Andrew Pincus, responded that in such a scenario, the law would have to be subjected to “strict scrutiny” by the court to determine whether there was a compelling reason for a violation of rights.

Foreign opponents

“There are many U.S. newsrooms – Politico, Business Insider, we talked about Reuters – that are owned by foreign companies,” Pincus said at another point in the discussion.

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Judge Neomi Rao interrupted him: “But no foreign opponents.”

Some of TikTok's biggest tech rivals are likely watching the case closely. According to Bloomberg Intelligence, a loss by TikTok is likely to drive more users to Alphabet Inc.'s Google, Meta Platforms Inc. and Snap Inc. It could also hurt Oracle Corp., which provides internet hosting services for TikTok.

The judges also questioned the government's arguments. TikTok is incorporated in the US and may be entitled to free speech protection, Rao said. She asked whether the government was arguing that the split between ByteDance and TikTok US was “a farce”?

Daniel Tenny, the government's lawyer, said they would not make that argument. “The application of the First Amendment is not about entities, it is about activities,” he said. “The expressive activity that the United States is targeting is the creation and maintenance of the recommendation engine and content moderation by ByteDance.”

“There is just a huge amount of information flowing back to China,” he said.

But the panel focused far more on the U.S. government's right to spy on a foreign adversary than on First Amendment concerns, Michael Forde, a lawyer specializing in free speech cases, said in an interview after the hearings. “The justices were definitely tougher on TikTok,” he said.

Law on disinvestment or prohibition

TikTok argued in court filings that the law would unfairly allow the government to “decide that a company can no longer own and publish the innovative and unique voice platform it created,” the company's petition to the court said.

But TikTok's critics – including the lawmakers who drafted the divestment or ban bill – say ByteDance has no constitutional rights because “it is a holding company incorporated abroad and claims in its charter that it does not conduct business in the United States.”

The Justice Department claims that the Chinese government has the ability to require Chinese companies like ByteDance to collect information on its behalf.

“Given TikTok's extensive reach in the United States, China's ability to use TikTok's features to achieve its overarching goal of undermining American interests poses a national security threat of immense depth and magnitude,” the Justice Department wrote in its court filing.

TikTok has questioned whether the government has evidence that China is using the app to collect information about Americans or influence their behavior.

The appeals panel is considering whether the government can use confidential information to argue its case without sharing it with TikTok. TikTok asked for the appointment of a special counsel and a stay of the law if the panel allows the government to use the secret documents.

The judges who will decide the case include Srinivasan, who was appointed by Obama, Rao, who was appointed by Donald Trump, and Douglas Ginsburg, who was appointed by Ronald Reagan.

(Updated with external comments.)

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