(Bloomberg) -- TikTok faces an uphill battle to avoid a US ban if its Chinese owner doesn’t sell the wildly popular social media app, judging from a grilling by an appellate court panel.
A three-judge panel for the US Court of Appeals for the DC Circuit signaled skepticism of TikTok’s argument Monday that the law signed by President Joe Biden banning the video-sharing app would violate the company’s free speech rights. The US 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 did not go well for TikTok,” said Bloomberg Intelligence analyst Matthew Schettenhelm, after the hearing. “There’s a real chance the DC Circuit upholds the law, which would make a last-second long shot plea to the Supreme Court the only realistic path to avoid a ban by Jan. 19.”
The ban is set to take effect on Jan. 19, but TikTok has indicated it will take the challenge all the way to the US Supreme Court. TikTok and the Justice Department have requested a DC Circuit ruling by Dec. 6. The parties then could ask the full court to look at the case.
ByteDance, TikTok and a group of its users argued in court that the law violates the Constitution’s First Amendment and would quash the free speech rights of its more than 170 million US users. But suggestions from lawyers for TikTok and its content creators that the company should be able to continue to operate in the US didn’t resonate with judges.
“Suppose the United States is at war with a country and there’s a question about whether that foreign country can own a major media source in the US while the war is going on,” asked Chief Judge Sri Srinivasan. “Is your submission that Congress can’t bar the enemies’ ownership of a major media source in the US?”
TikTok’s lawyer, heavyweight Supreme Court litigator Andrew Pincus, replied that in such a scenario the law should be subject to a “strict scrutiny” test in court to determine whether there is a compelling reason to infringe on rights.
Foreign Adversaries
“There are lots of US speakers — Politico, Business Insider, we talked about Reuters — that are owned by foreign entities,” Pincus said, at another point in the arguments.
Judge Neomi Rao interrupted, “But not foreign adversaries.”
Some of the biggest tech competitors to TikTok are likely paying close attention to the case. A TikTok loss is expected to drive more users to Alphabet Inc.’s Google, Meta Platforms Inc. and Snap Inc., according to Bloomberg Intelligence. It could also hurt Oracle Corp., which provides internet hosting services to TikTok.
The government’s arguments also came under question from the judges. TikTok is incorporated in the US and may be entitled to free-speech protection, Rao suggested. She asked whether the government is arguing that the separation between ByteDance and TikTok US “is a sham?”
Daniel Tenny, the government’s lawyer, said they weren’t making that argument. “The application of the First Amendment isn’t about entities, but activities,” he said. “The expressive activity that the United States is targeting is the creation and maintenance of the recommendation engine and the content moderation by ByteDance.”
“There are just reams of information that are going back to China,” he said.
But the panel focused much more on the US government’s right to police a foreign adversary than First Amendment concerns, said Michael Forde, a lawyer who specializes in free-speech cases, during an interview following the arguments. “The judges were definitely harder on TikTok,” he said.
Divest-or-Ban Law
TikTok argued in court papers that the law would unfairly “allow the government to decide that a company may no longer own and publish the innovative and unique speech platform it created,” according to the company’s petition to the court.
But TikTok’s detractors – including the lawmakers who wrote the divest-or-ban law – say ByteDance doesn’t have constitutional rights because “it is a foreign incorporated holding company and in its brief asserts no operations within the United States.”
The Justice Department claims the Chinese government has the ability to require Chinese companies like ByteDance to gather intelligence on its behalf.
“Given TikTok’s broad reach within the United States, the capacity for China to use TikTok’s features to achieve its overarching objective to undermine American interests creates a national-security threat of immense depth and scale,” the Justice Department wrote in its court filing.
TikTok has questioned whether the government has evidence that China uses the app to collect information on Americans or influence their behavior.
The appellate panel is weighing whether the government can use classified information to argue its case without sharing it with TikTok. TikTok asked that a special master be appointed and that the law be put on hold if the panel lets the government use the secret documents.
The panel of judges that will decide that case includes Srinivasan, who is an Obama-appointee; Rao, who was appointed by Donald Trump, and Douglas Ginsburg, a Ronald Reagan-appointee.
(Updates with outside comment.)
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