Biden’s TikTok Dilemma: Going after China or pursuing antitrust claims on social media

In big tech, data is currency and TikTok prints money. Once known for its viral dance videos, the platform has built itself into a digital advertising juggernaut. The app has more than 150 million monthly users and 5 million companies that it can gather information from to sell ads, it revealed on March 21. It is by far the leading video sharing app in America when it comes to grabbing and keeping users’ attention. Competitors are eager to catch up and copy the video features.

But national security concerns based on TikTok’s data privacy practices and the potential for the Chinese government to influence the content users see on the platform are jeopardizing the lucrative trade. The company says the Biden government is demanding that the Chinese owners sell their shares or possibly get a US ban on the app. By banning the platform, the government risks prioritizing alleged national security interests at the expense of its antitrust agenda. Meta and Google, which are filing lawsuits from competition law enforcement seeking to break up the companies, will gain the most if TikTok is banned. Users would probably flock to the only viable alternatives in Instagram Reels and YouTube Shorts.

“We know that TikTok was extremely effective at competing in the social media market,” said Eric Goldman, professor and director of the High Tech Law Institute at Santa Clara University School of Law. “To the extent that there are concerns about market dominance, curbing TikTok is counterproductive to antitrust issues.”

Demands from the president for TikTok to sell to a U.S. company cemented Democrats’ turnaround over perceived threats to TikTok’s national security, with momentum against the platform’s escalation. The government and more than 30 states have blocked the app on government-issued devices. And, in a precursor to Biden’s ultimatum, on March 7 the White House supported a bipartisan measure to take action against TikTok and other companies subject to influence from foreign adversaries by creating a new unified framework for assessing and tackling foreign technology.

The effort came after Republicans in a House committee rammed a separate bill that would effectively ban TikTok on mobile devices in the US on the heels of the company acknowledging that its Beijing-based parent company, ByteDance, was using data extracted from the app. collected to monitor the physical location of journalists using their IP addresses.

To date, lawmakers have provided no evidence that TikTok has provided US user data to the Chinese government or that it is aiming to influence the content users see on the platform.

While the government has taken an increasingly belligerent stance on China, it has failed to enact a national data privacy law that would protect users from the rampant data collection that has become an industry-wide practice. TikTok collects massive amounts of data, but no more than its peers. Meta tracks the content, communications and other information that users provide when using its products, including geolocation and biometric data. So are pretty much all free apps, which make money by somehow selling data to third parties. Of more than 17,000 apps examined in a 2018 study, the majority leaked sensitive content recorded by the camera, screen, and microphone over the Internet in “ways that are either undisclosed or unexpected given the apps’ purpose .”

Antitrust enforcers can look to India for a glimpse of how Meta and Google will try to snatch TikTok’s market share in the absence of the app. A year after the country banned TikTok in 2020 over similar national security and privacy concerns, Instagram became the most popular social media app and retook the top spot in global downloads, according to data from intelligence firm Sensor Tower. It became Meta’s first app to lead the category since WhatsApp took the position in 2019. While TikTok copycats could emerge to fill the void left by the platform in the US – as in India – Meta and Google have competitive advantages because of their entrenched market positions and global reach.

“Eliminating an option like TikTok will create even stronger market power for companies that are already in the social media space,” said Rebecca Allensworth, an antitrust professor at Vanderbilt Law School. Emile El Nems, a senior lending officer at Moody’s Investors Service, says a ban would “benefit YouTube, Instagram and Snap, likely resulting in a larger revenue share of the overall ad wallet.” Research and brokerage firm Bernstein similarly notes that “again, Meta looks like the most likely winner with the best advertising products” alongside YouTube, which offers “the greatest overlap of brand campaign objectives” and “could see advertising dollars return home.”

If a TikTok ban comes along, it wouldn’t be the first time the White House has given thumbs up to the competition. In 2020, the government won a major victory when a federal appeals court overturned a ruling against Qualcomm that would have forced the company to review its licensing activities for violating antitrust laws. A three-judge panel of the 9th U.S. Circuit Court of Appeals upheld Qualcomm’s monopoly in the mobile chip market, ruling that the company is under no obligation to license its patents to rivals.

But the reversal was also a critical loss for the government. The Federal Trade Commission raised the case that the Justice Department stepped in at the eleventh hour to oppose because any remedy that weakened Qualcomm’s position in the burgeoning 5G market threatened national security as it was a vital competitor belongs to Huawei – a Chinese-owned company. that sells smartphones and other items that form the backbone of the telecom network. The intervention of federal prosecutors directly undermined antitrust regulators’ most momentous enforcement victory in decades.

“China would likely compete vigorously to fill the gap left by Qualcomm if Qualcomm’s ability to invest and innovate diminished,” Ellen Lord, then Secretary of Defense, said in a court statement. “Participation and leadership in setting 5G standards is a zero-sum game – if the United States does not lead, an aggressive, eager China will set standards to suit its own wishes.”

Bryan Cunningham, a former attorney for the Clinton administration’s national security adviser and the US Committee on Foreign Investment, says the conflicting positions by the sister agencies are “unusual” but historically “predictable” when national security and antitrust issues collide. .”

The national security and censorship concerns that TikTok allegedly caused are not unique to the company. Facebook was used to fuel an uprising at the Capitol after data from the app was used to influence the presidential election in 2016. YouTube’s rules have been manipulated to silence oppression in China.

In 2018, the Justice Department accused Huawei of stealing trade secrets from US companies after Congress blacklisted the company, barring US entities from selling manufacturing parts to the Chinese company. Huawei called the actions “political persecution” in a statement at the time.

“The sole purpose of the US government is to attack, discredit and defame the reputation of Huawei’s leading technologies,” the statement said. “They want to harm Huawei’s competitive advantage in the global market.”

In another move that benefited a US company also suspected of anti-competitive conduct, the Justice Department in 2018 indicted Chinese chipmaker Fujian Jinhua and Taiwanese chipmaker UMC for stealing trade secrets from Idaho-based company Micron . As with Huawei, Fujian Jinhua was blocked from importing US components, forcing the production plant to shut down.

The enforcement actions further consolidated the semiconductor market, dubbed “dynamic random access memory”, by crippling one of Micron’s competitors. Micron — the only remaining U.S. manufacturer of those semiconductors, which accounted for more than half of China’s supply in 2017 — has been charged with violating antitrust laws in federal court and foreign regulators. The company and two others own 95 percent of the market for such chips, according to court documents in a price-fixing lawsuit.

“Many antitrust laws are built around the idea that we should encourage entrepreneurship and economic opportunity,” says Allensworth. “What that really means is American entrepreneurship and American opportunity.”

Some lawmakers agree on the urgency of passing a national data privacy law rather than a patchwork of solutions focused on a single app. “Social media companies — and TikTok is not unique in this — collect a massive amount of user data and use powerful AI tools to make eerily accurate predictions of human behavior and attempt to manipulate that behavior,” says Rep. Jay Obernolte, R-Calif., during TikTok CEO Shou Zi Chew’s testimony before Congress on March 23. “It’s not just TikTok. It is all social media companies doing this.”

A ban would also say nothing about China’s ability to collect US user data. In the absence of a national data privacy law, the Chinese government – ​​and any other foreign adversary – can buy large amounts of personal information from data brokers. “Every government has many ways to get data on Americans, including buying that data from a myriad of sources because all the apps on your phone collect data,” said Anupam Chander, a professor of law and technology at Georgetown University. “A national data privacy law would introduce controls over what information is collected and how it is shared, so that huge databases of information are not available for sale without users’ knowledge and consent.”

In addition to undermining competition enforcement, Chander notes that the US risks China retaliating by erecting barriers to participate in its economy if it bans or forces TikTok sales. He adds: “Hollywood films are edited to make them more palatable to the Chinese government. That did not require China to own the film studio.”

A version of this story first appeared in The Hollywood Reporter magazine on March 29. Click here to subscribe.