The TikTok Ban Has Happened Before
Banning the social media company is not only thinkable, it's quite likely. Just ask the many companies that have been in its position.
Can a Chinese-owned cultural phenomenon, one that more than 150 million Americans give the details of their lives to each day, really be banned? Hell yeah it can. It’s shocking, sure. But don’t let anyone call it “unthinkable.” Regulators have kicked Chinese companies out before.
In fact, as the Supreme Court prepares on January 10 to take up the question of TikTok’s continued existence in the United States, around the world the executives of dozens of companies are reading the headlines and undoubtedly waking up sweating in the night as they relive the trauma of being torn to pieces against the rocks of US regulations after their own dalliances with Chinese ownership. And that was just at the hands of a little-known interagency body. TikTok and its parent company ByteDance face a law specifically written by Congress about them.
I can’t speak to what the Supreme Court will decide — that’s not my beat, and not my expertise. I do know that when it comes to domestic technology companies, they’ve generally held that the First Amendment applies to social media and to social media companies. (Although those companies get to double dip unfairly, in my view. Thanks to Section 230 protections, they enjoy a freedom from accountability for what is published on their platforms that other First Amendment-protected industries, like the news business, have to reckon with. You can read my thoughts on that here.)
Here, however, they’re not dealing with a domestic company. They’re looking at whether the Protecting Americans from Foreign Adversary Controlled Applications Act is constitutional. And if the experience of other companies has anything to teach us, it’s not only constitutional for regulators to force TikTok to sell to American owners or face a ban, it’s standard operating procedure.
Let’s talk about the Committee on Foreign Investment in the United States (CFIUS), the regulators that have torn up many a deal memo. It’s a committee of nine voting members, including the Secretaries of State, Defense, Commerce and others, chaired by the Treasury Secretary. President Ford created it in 1975 to review acquisitions of and investments in American companies by foreign companies, and it began gathering real power in the late 1980s in response to Japanese investment activity. In 2007, when a firm based in the United Arab Emirates moved to buy the commercial operation of six American ports, including New York/New Jersey and Miami, Congress handed CFIUS statutory authority, and since then, it has wielded that power against a bunch of foreign companies and foreign investors.
For years CFIUS barely looked at China. Instead, countries like France, Canada, the UK and Japan got the most scrutiny. But rising concerns about China caused CFIUS to begin spiking its deals in the semiconductor industry in the last two decades. President Obama blocked a Chinese firm from acquiring a US subsidiary of a German semiconductor maker in 2016, and in 2017 stopped a Chinese investment firm from acquiring a US supplier of semiconductors to our military, for instance.
Why be so suspicious of Chinese ownership? Because in China the relationship between companies and the Central Communist Party is very fluid, as a matter of law. Xi Jinping announced soon after taking office that "whoever controls big data technologies will control the resources for development and have the upper hand.” He signed the National Intelligence Law of 2017, giving Chinese intelligence services the right, on national security grounds, to private data held within any Chinese company. In 2023 the law expanded to encompass any data defined as relevant to counter-espionage, a designation so vague it could include anything.
I recently met an American entrepreneur living in China who was looking to build software that would help people fight addiction. But before he could begin, he told me, he had to move back home.
“Doesn’t China have a market for you?” I asked.
“Oh sure, it’s enormous,” he said. “But as soon as I start I’ll be visited by some spy agency. Give them the names of Americans who suffer from addiction? I can’t have that.”
This is the kind of thing that has led CFIUS to be most recently concerned with the data of American citizens, and its efforts to keep that data away from Chinese investors is a big reason why the TikTok ban looks more and more likely. Here are a few of its greatest hits.
In 2016 AppLovin, a mobile advertising company with data on millions of American consumers, moved to sell itself to a Chinese private equity firm. Nope, said CFIUS, according to Reuters, and instead the company had to downgrade to a minority stake. CFIUS imposed big caveats on the Chinese acquisition of US insurance company Genworth, requiring that data be handled by a third-party service in the United States, and delayed the deal for two years. And in 2018 CFIUS killed Jack Ma’s effort to take over MoneyGram, which would have given him money-transfer customers (and their data) in 200 countries, including the US.
But the story that TikTok undoubtedly knows best is that of Grindr. Yes, the LGBTQ dating app.
In 2018 one of the world’s biggest video game makers, Beijing-based Kunlun Tech, acquired Grindr, billed at the time as the world’s largest gay social network. Grindr deals, of course, in a particularly sensitive form of data, and unfortunately its privacy practices didn’t exactly assuage American fears that Chinese ownership might give Beijing a vast dossier of compromising information on more than 3 million daily active users.
In 2018 the Swedish public broadcaster SVT reported findings from the Norwegian nonprofit SINTEF that Grindr was sharing its users’ HIV status, including their “last tested” date, with two outside firms. (The same day Buzzfeed reported this, the company announced it would stop doing so.) Then an NBC News investigation found a thriving market of illegal drugs on the platform. And in 2020 another Norwegian body found Grindr’s privacy protections violated EU laws, causing Twitter to kick the site off its ad platform.
(By the way, important to note here just how crucial European agencies, operating under the strongest privacy laws in any Western democracy, have been and will continue to be in protecting privacy. Thank you, EU regulators.)
CFIUS doesn’t publicize what it does and it doesn’t give reasons for its decisions, but the Financial Times reported that in the case of Grindr it was concerned about the potential for blackmail. (Well, sure.) And, because Kunlun had not run its acquisition by the committee ahead of time, as most foreign companies know to do, CFIUS decided to blow it up after the fact, forcing Kunlun to sell to American investors in 2020.
The Grindr saga has big lessons for TikTok, and for the 150 million Americans (like me) who use it each day. And the big one is that it merely takes worries about Chinese influence to blow up foreign ownership of any company, not least one that is in the surveillance business.
A lot has been made about a lack of “hard evidence” that TikTok has been used to spy on or manipulate Americans. But that’s not exactly true. The Office of the Director of National Intelligence concluded that in 2022 “TikTok accounts run by a PRC propaganda arm reportedly targeted candidates from both political parties during the U.S. midterm election cycle.” And evidence from other countries is pretty damning. As I wrote a couple of weeks ago, the Romanian supreme court reversed that country’s presidential elections after its intelligence services found that foreign actors had used TikTok to give a pro-Russian candidate a surprise lead in the primaries.
The deteriorating relationship between the US and China has of course also made both countries prone to deep paranoia about one another. As former intelligence official Thomas Fingar and political scientist David Lampton wrote recently about China’s perspective on the West in The Washington Quarterly…
Any action that conceivably could have negative implications for China is construed as having been undertaken specifically and primarily to constrain or weaken the regime. In response, the regime tries to minimize its vulnerability to interference and attempted manipulation by pursuing policies designed to reduce dependence (and interdependence) by achieving a high degree of economic, military scientific, and other forms of self-reliance. A key objective is to minimize opportunities for outsiders to exploit linkages to China’s disadvantage.
However paranoid a TikTok ban may seem in the United States, it’s perfectly rational under the long-held paranoia of the PRC. This helps to explain, of course, why China bans all forms of American social media inside its borders, even as we have allowed it to export its own to us. (You can hear Chris Hayes and I discuss this asymmetry at length on his podcast…)
Now TikTok faces its own, custom-written law, one that specifically forces ByteDance to sell TikTok to a US company, or imposes enormous fines on companies like Apple and Google if they continue to make the app available for download. The bill replaces the CFIUS’s authority — strong enough to slow or kill many a deal, but technically not binding — with the full force of law, and gives the Supreme Court authority to make a final determination. While the chance for TikTok’s lawyers to make an appeal to SCOTUS may seem better for the company than dealing with CFIUS, which didn’t have to publicly describe its rationale or hear any appeals, I don’t think it’s cause for hope on ByteDance’s part. If nothing else, it’s pretty bad news when Congress writes a law with your company’s name in it. And I think it’s reasonable to assume that because the act specifically cites ByteDance, the justices will be fairly hostile to any suggestion that ByteDance should somehow be exempt from it.
Let me close here with a twist in all this that cuts me up pretty badly. While CFIUS has done a very energetic job of protecting sensitive American data from Chinese companies and the intelligence apparatus they might pass it on to, American regulators do almost nothing to protect Americans from surveillance by domestic companies. There is no federal data privacy law in the United States, and while TikTok collects an obscene amount of information about its users (including their location, their identity, what phone they’re using, their likeness and anything else they can match with the vast surveillance apparatus that is the modern advertising landscape), so do American social media companies. American social media companies regularly move the goalposts on privacy, such as when Facebook acquired WhatsApp, promising to keep the messaging platform private, and then in 2016 announced it would begin collecting private data on WhatsApp users. We just seem to tolerate that sort of invasion of privacy when it’s an American company doing the invading.
This is all to say that I’m of two minds about the legitimacy TikTok ban. China has cultivated a national surveillance apparatus so powerful and so efficient that it now exports city-scale surveillance packages to more than 52 nations around the world. Data inside a Chinese company is effectively also inside that national surveillance apparatus. So handing a live nationwide psychological profile on 150 million Americans to a Chinese-owned company is asking for trouble. But we also have shown such callous indifference to the privacy of Americans that specifically wringing our hands about TikTok while giving free rein to the rest of surveillance capitalism rings hollow to me.
But I also believe none of that means anything to TikTok’s fate in court. The thing to take away from the long modern history of thwarted acquisitions and reversed deals is that it’s perfectly plausible that on January 19th TikTok, the most successful cultural import in US history, will face banishment.