Go after China or pursue social media antitrust claims: Biden’s TikTok Dilemma

Calls to prohibit the app are likely to increase after CEO Shou Zi Chew’s legislative statement failed to convince legislators worried about links to Beijing, which could strengthen social media competitors.

Data is the new cash in large tech, and TikTok is the money printer. The site, which was once well-known for its popular dance videos, has grown into a digital advertising behemoth. The app revealed on March 21 that it had more than 150 million daily users and 5 million companies from which it could gather information to sell advertisements. In terms of grabbing and keeping users’ interest, it is by far the best video-sharing software in America. In an effort to catch up, rivals are stealing its streaming functions.

However, the profitable business of TikTok is in jeopardy due to national security worries based on the platform’s data protection policies as well as the possibility that the Chinese government could sway the material that users see there. The business claims that the Biden administration is pressuring TikTok’s Chinese proprietors to sell their shares or risk having the app banned in the United States. The government runs the risk of putting claimed national security concerns ahead of its competition goal by outlawing the platform. The two businesses that stand to benefit the most from TikTok’s prohibition are Meta and Google, who are defending themselves against litigation from regulators attempting to dissolve the companies. Users would probably swarm to the two remaining options, YouTube Shorts and Instagram Reels.

Eric Goldman, professor and head of the High Tech Law Institute at Santa Clara University School of Law, asserts, “We know that TikTok had been extremely effective in competing in the social media market.” “Cutting down TikTok is counterproductive to antitrust concerns, to the extent there are concerns about market dominance.”

The president’s demands that TikTok sell to an American company solidified Democrats’ about-face on the platform’s claimed dangers to national security, and opposition to it grew. On smartphones used by the government, the program has been banned by more than 30 states and the federal government. In addition, the White House backed a joint motion on March 7 to take action against TikTok and other businesses susceptible to influence from foreign foes by creating a new united structure for evaluating and resolving foreign technology. This was a forerunner to Biden’s demand.

After TikTok admitted that its Beijing-based parent company, ByteDance, had used data from the app to track journalists’ physical locations using their IP addresses, Republicans on a House committee rammed through a separate bill that would effectively ban the app on mobile devices in the United States.

Legislators have not yet presented any proof that TikTok gave the Chinese government access to American users’ data or that this data was used to sway what users see on the app.

Although the government has taken a more aggressive posture toward China, it has not yet enacted a national data privacy legislation that would shield users from the widespread data gathering that has evolved into an industry standard. TikTok gathers a lot of data, but not more than its competitors. When customers use Meta’s goods, it monitors the content, interactions, and other information they give up, including locations and physiological information. Almost all free applications also generate money in some way by marketing user info to third parties. In a 2018 study of more than 17,000 apps, the majority exposed private information captured by the camera, screen, and microphone online in “ways that are either undisclosed or unexpected given the purpose of the apps.”

For a preview of how Meta and Google will attempt to wrest TikTok’s market share in the absence of the app, antitrust regulators can turn to India. According to data from intelligence firm Sensor Tower, Instagram became the nation’s most widely used social media app and regained the top position in global installs a year after the country outlawed TikTok in 2020 due to comparable national security and privacy issues. Since WhatsApp retained the top spot in the category in 2019, it became the first Meta-owned app to do so. Despite the possibility of TikTok copycats emerging in the United States to cover the vacuum left by the platform, as they did in India, Meta and Google enjoy competing benefits due to their established market places and extensive worldwide presence.

According to Rebecca Allensworth, a competition expert at Vanderbilt law school, “when you eliminate an option like TikTok, that will create even stronger market power for companies already in the social media space.” The research and brokerage firm Bernstein also notes that “Meta once again looks like the likeliest winner with best-in-class ad products” alongside YouTube, which “offers the highest overlap of branded campaign objectives” and “could see ad dollars return home.” Senior credit officer Emile El Nems at Moody’s Investors Service claims that a ban would “benefit YouTube, Instagram, and Snap, likely resulting in higher revenue share of the total advertising wallet.”

If a TikTok prohibition is put into effect, it wouldn’t be the first time the White House interfered with the balance of power. A federal appeals court reversed a Qualcomm judgment that would have required it to restructure its licensing business because it had violated competition laws in 2020, giving the government a significant victory. a group of three judges from the 9th U.S. The Circuit Court of Appeals upheld Qualcomm’s hegemony in the market for smartphone chips, concluding that it is not required to sell its rights to competitors.

But the administration also suffered a significant setback with the reverse. The Department of Justice intervened at the last minute to oppose the case brought by the Federal Trade Commission on the grounds that any measure weakening Qualcomm’s position in the developing 5G market posed a threat to national security because Qualcomm is a key rival of Huawei, a Chinese-owned company that sells smartphones and other equipment that forms the core of the telecom network. The most significant enforcement win for competition authorities in decades was immediately weakened by the federal attorneys’ involvement.

Ellen Lord, then the undersecretary of defense, testified in court that “China would likely compete vigorously to fill any void left by Qualcomm should Qualcomm’s ability to invest and innovate be diminished.” “5G standard setting participation and leadership is a zero-sum game; if the United States does not lead, an eager, aggressive China will set standards to accommodate its own desires.”

It is “unusual,” but traditionally “predictable when national security and antitrust issues become opposed to one another,” according to Bryan Cunningham, senior legal advisor to George W. Bush’s National Security Council.

TikTok is not the only business that is supposedly raising national security and censoring issues. Facebook was used to help spark an uprising in the United States. Capitol following the 2016 presidential election’s manipulation by the use of app data as a weapon. China’s tyranny has been muffled by manipulating YouTube’s policies.

After Congress put Huawei on a blacklist, prohibiting American companies from selling industrial components to the Chinese company, the Justice Department filed a complaint against the company in 2018 for allegedly taking trade secrets from American businesses. At the time, Huawei described the activities as “political prosecution.”

The report claimed that “the U.S. government’s only goal in doing this is to attack, discredit, and tarnish the reputation of Huawei’s leading technologies.” “They want to weaken Huawei’s advantage in the international market.”

The Justice Department filed a lawsuit against Chinese chipmaker Fujian Jinhua and Taiwanese chipmaker UMC in 2018 for allegedly taking trade secrets from Idaho-based firm Micron in another action that helped an American corporation also suspected of engaging in anticompetitive behavior. Similar to Huawei, Fujian Jinhua’s manufacturing facility had to be shut down because it was unable to ship American parts.

The legal moves crippled one of Micron’s rivals, which helped to further stabilize the market for chips known as “dynamic random-access memory.” In federal court and by foreign authorities, Micron—the sole American manufacturer of those chips that made up more than half of China’s supply in 2017—has been charged with breaking trade laws. According to court documents in a price-fixing lawsuit, the company and two other parties control 95% of the market for such processors.

According to Allensworth, “a lot of antitrust law is based on the notion that we need to promote entrepreneurship and economic opportunity.” “Really, what that means is American opportunity and American entrepreneurship.”

Some legislators concur that it is urgent to enact a federal data protection legislation rather than a piecemeal approach that focuses on a single app. Rep. Jay Obernolte, R-Calif., stated during TikTok CEO Shou Zi Chew’s March 23 testimony before Congress that social media companies, including TikTok, “gather a tremendous amount of user data and use powerful AI tools to make eerily accurate predictions of human behavior and seek to manipulate that behavior.” “It goes beyond TikTok. All social media firms are engaging in this.

Additionally, a prohibition wouldn’t stop China from collecting customer data from Americans. The Chinese government, as well as any other foreign foe, can purchase vast amounts of personal information from data vendors in the lack of a national data protection legislation. According to Anupam Chander, a professor of law and technology at Georgetown University, “Any government has many ways to get data on Americans, including buying that data from a host of sources because all the apps on your phone are gathering data.” A national data privacy legislation would impose restrictions on the information that is gathered and shared, preventing vast information databases from being made commercially accessible without the knowledge and permission of the users.

Chander points out that if the U.S. forbids or forces a sale of TikTok, it runs the risk of weakening competition regulation as well as China retaliating by increasing obstacles to involvement in its economy. Hollywood films are altered to make them more appealing to the Chinese government, he continues. It was not necessary for China to be the studio owner for that.