TikTok reportedly plans to challenge potential US ban in court

TikTok reportedly plans to file a legal challenge against U.S. lawmakers’ push to ban it or force the app to spin out of parent company ByteDance Ltd.

Michael Beckerman, the head of U.S. public policy at TikTok, detailed the plan in an internal memo to employees. Bloomberg and the Financial Times published excerpts from the note early Monday.

On Sunday, the House of Representatives passed a bill that would ban TikTok in the U.S. unless parent company ByteDance sells it. The bill, which was bundled with a foreign aid package for Ukraine and Israel, is a revised version of legislation that the House first approved in March. The new version extends the amount of time ByteDance would have to sell TikTok from six months to a year.

The bill is expected to be approved by the Senate later this year. Last month, shortly before the House approved the first iteration of the proposal, President Joe Biden indicated that he plans to sign the legislation.

In his internal memo to employees, TikTok’s Beckerman wrote that “at the stage that the bill is signed, we will move to the courts for a legal challenge.” He argued that the legislation is a “clear violation of the First Amendment rights of TikTok’s 170 million American users” and claimed it would have “devastating consequences” for the millions of small businesses active on the platform.

TikTok’s legal team is led by ByteDance general counsel Erich Andersen. Sources familiar with the company’s plans told the Financial Times that Andersen will likely step down before the potential court challenge begins. Separately, Bloomberg reported that ByteDance intends to “exhaust all legal actions” before considering a sale of TikTok.

Previously, TikTok successfully convinced a federal court in Montana to block a state bill designed to block the app. The judge presiding over the case determined that the bill likely violated the First Amendment.

A hypothetical TikTok divestiture would likely represent one of the largest tech deals in recent memory. According to a March report from The Information, investors estimate that TikTok generated $20 billion in revenue last year. But it’s believed the company is not yet profitable, which may lower the value of a potential sale.

After the House approved the initial version of the TikTok bill last month, former U.S. Treasury Secretary Steven Mnuchin revealed that he is organizing an investor consortium to buy TikTok. Mnuchin is the managing director of Liberty Strategic Capital, a private equity firm that has made a number of investments in the tech industry. He didn’t specify which investors might participate in the deal, but indicated the plan is to rebuild the app around technology developed in the U.S.

A recent report suggests Bobby Kotick, the former Chief Executive Officer of video game maker Activision Blizzard Inc., is also seeking to assemble an investor consortium to buy TikTok. Activision Blizzard was acquired by Microsoft Corp. last year for $68.7 billion.

Image: TikTok