US appeals court upholds TikTok law forcing its sale

A US federal appeals court has upheld a law requiring Chinese-based ByteDance to divest its popular short video app TikTok in the United States by early next year or face a ban.

The decision is a complete win for the US Justice Department and opponents of the Chinese-owned app and a devastating blow to ByteDance.

The ruling now increases the possibility of an unprecedented ban in just six weeks on a social media app used by 170 million people in the US.

The ruling is likely be appealed to the Supreme Court or full appeals court panel by ByteDance and TikTok.

The appeals court said the law “was the culmination of extensive, bipartisan action by the Congress and by successive presidents. It was carefully crafted to deal only with control by a foreign adversary, and it was part of a broader effort to counter a well-substantiated national security threat posed by the PRC (People’s Republic of China)“.

US appeals court Judges Sri Srinivasan, Neomi Rao and Douglas Ginsburg considered the legal challenges brought by TikTok and users against the law that gives ByteDance until January 19 to sell or divest TikTok’s US assets or face a ban.

The decision - unless the Supreme Court reverses it - puts TikTok’s fate in the hands of first President Joe Biden on whether to grant a 90-day extension of the Janurary 19 deadline to force a sale and then to president-elect Donald Trump, who takes office on January 20.

But it is not clear whether ByteDance could meet the heavy burden to show it had made significant progress toward a divestiture needed to trigger the extension.

TikTok said it expected the US Supreme Court would reverse the appeals court decision on First Amendment grounds.

“The Supreme Court has an established historical record of protecting Americans’ right to free speech, and we expect they will do just that on this important constitutional issue,” TikTok said in a statement, adding the law will result “in outright censorship of the American people”.

Trump, who unsuccessfully tried to ban TikTok during his first term in 2020, said before the November presidential election he would not allow the ban on TikTok.

The court acknowledged its decision would lead to TikTok’s ban on January 19 without an extension from Biden.

“Consequently, TikTok’s millions of users will need to find alternative media of communication,” the court said, which was because of China’s “hybrid commercial threat to US national security, not to the US government, which engaged with TikTok through a multi-year process in an effort to find an alternative solution”.

The opinion was written by Judge Ginsburg, an appointee of president Ronald Reagan, and joined by Judge Rao, who was named to the bench by Trump, and Srinivasan, an appointee of president Barack Obama.

The Justice Department says under Chinese ownership, TikTok poses a serious national security threat because of its access to vast personal data of US citizens, asserting China can covertly manipulate information that users consume via TikTok.

ByteDance, backed by Sequoia Capital, Susquehanna International Group, KKR & Co and General Atlantic among others, was valued at $US268 billion ($A420 billion) in December 2023 when it offered to buy back about $US5 billion worth of shares from investors, Reuters reported at the time.

The law prohibits app stores like Apple and Alphabet’s Google from offering TikTok and bars internet hosting services from supporting TikTok unless ByteDance divests TikTok by the deadline.

US officials have warned TikTok’s management is beholden to the Chinese government, which could compel the company to share the data of its US users.

TikTok has denied it has or ever would share US user data, accusing the country’s politicians in the lawsuit of advancing “speculative” concerns.

In a concurring opinion, Judge Srinivasan acknowledged the decision will have major effects, noting “170 million Americans use TikTok to create and view all sorts of free expression and engage with one another and the world. And yet, in part precisely because of the platform’s expansive reach, Congress and multiple presidents determined that divesting it from (China’s) control is essential to protect our national security”.

He added that “Because the record reflects that Congress’s decision was considered, consistent with longstanding regulatory practice, and devoid of an institutional aim to suppress particular messages or ideas, we are not in a position to set it aside.”