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Comment by StavrosK | Hacker News Reader

I don't understand how the US can force a Chinese company to sell itself, can someone explain?

The legal framework is explained in the executive order.

https://www.whitehouse.gov/presidential-actions/order-regard...

Bytedance acquired Musical.ly in 2017, and merged it into TikTok the next year. The administration is now blocking the sale of Musical.ly under Section 721 of the Defense Production Act. Section 721 "authorizes the President to suspend or prohibit a transaction, by or with any foreign person, that may result in control of a U.S. business by a foreign person and that may threaten to impair national security." [1] The president used this power to block the sale of Musical.ly on national security grounds.

Congressional approval is not needed for this action. The legal framework was approved by Congress with the Foreign Investment and National Security Act of 2007. The president has the legal authority to issue such national security orders. However, typically the president delegates the national security review to CFIUS, a government agency.

TikTok never received clearance from CFIUS when it acquired Musical.ly in 2017 [3]. This allows the US to preform a national security review now, three years later.

To answer your question, Bytedance is not legally 'forced' to divest their US operations. They are proceeding with the sale because the alternative is a death blow to their US operations.

[1] https://www.gibsondunn.com/cfius-guidance-alert/

[2] https://en.wikipedia.org/wiki/Foreign_Investment_and_Nationa...

[3] https://www.reuters.com/article/us-tiktok-cfius-exclusive/ex...

Looks like both Bytedance and Musical.ly are Cayman islands, so I'm not sure how the US has any say in what they do, though I understand the spirit is "do what we want or lose the US (and possibly the world) market".

I don't know how anything the US does can affect what two companies in a different country decide to do between them, legally speaking. The executive order sounds weird to me.

Also, I don't understand how they can block a sale three years later. What's the time frame on that? Why not ten years later? A hundred?

The US can embargo the product and prevent its use in the US. This is a significant enough market to the company that they'd rather have whatever the discounted sale price of a forced sale than what they think the future value of (Tiktok - USA - India - other US Allies that get encouraged to do the same) is.

> "... and that may threaten to impair national security."

Is there any framework for independent review whether something is a genuine threat?

I don’t know, but lots of people seem to think that social networks can be used to manipulate elections.

>Is there any framework for independent review whether something is a genuine threat?

I'm not sure whether that would help. Both sides are pretty anti-china atm.

When a country say another country/company is a threat. Does it need a framework? It is all politics.

Many believe that this is the mechanism by which the Trump administration is using to remove Chinese influence from TikTok rather than the cause.

It’s easier to legally justify than proving the ‘security threat’ of TikTok giving the Chinese government users data.

I'm not quite sure what to explain, since it is basically indistinguishable from the way any other racketeer operates. This is pretty much the same thing as asking somebody at gunpoint to sell his Rolex to you for $20, or else you take it by force. The victim is at loss anyway, but when choosing between $20 and nothing, they may as well choose $20.

US market makes up a large portion of TikTok's revenue, some say 50%. So it can threaten to destroy that market completely, for nothing, forbidding TikTok and causing the loss of what is currently 50% of its revenue. Or it can offer some money (an amount, which normally wouldn't be enough to sell) to take it, or at least a part of it. Time will tell if TikTok will find the risk worth the trouble.

> forbidding TikTok

I'm still not sure how that would work. Sure, they could forbid people from downloading new versions of the app, but the existing app is already out there on phones - would they be able to force removal of the app?

This is not what is proposed, nor is what would happen. Speech protections are very strong in the US and direct censorship of an otherwise legal application is not likely to be a legal possibility.

What the executive does have the authority to do is regulate commerce. The proposal is that ByteDance would be embargoed from doing business in the US. This means, they can't pay for app store developer licenses, sell ads in the US, buy local CDN/cloud infrastructure etc.

You could have the app, but it's not likely that ByteDance would be able to operate it in the US.

Well, I won't suggest any scenarios of how it would work right now, even though I don't think it's totally inconceivable... I'll just point out that I don't actually need a loaded gun to make you sell your Rolex for $20. I only need you to believe it's loaded.

that doesnt really matter too much. US advertisers won't be able to pay tiktok. Basically 0 money for bytedance, while plenty of trafic expenses if they keep servicing.

And ofc, apple and google can simply remove the app from your phone.

The equation is a bit similar to the one played out in the movie "Goodfellas".

You have two mobsters, the good mobster and the bad mobster, and a business. The bad mobster actively harasses the business in multiple ways, prompting the business to seek protection from the good mobster in exchange for buying into the business.

Of course, both the good mobster and the bad mobster are in the same mob, and benefit from the revenue stream from the newly acquired stake in business.

Tell that to wechat and Whatsapp ... the ccp is the bad guy.

Its not meant to be a commentary on whos good and bad on some objective scale, just an anecdote on the effects in play

I think the forced part is because either they sell or stop being available in the US market due to the ban the US threatened with.

So they're not 'forced' to per se - but if they don't sell they'll lose a large part of their market. Or am I wrong?

[edit for clarity]

>So they're not 'forced' to per se - but if they don't sell they'll lose a large part of their market. Or am I wrong?

Correct.

The US is 10% of TikTok's user base, but accounts for 50% of revenue. Further, most of TikTok's most popular users are American (https://en.wikipedia.org/wiki/List_of_most-followed_TikTok_a...).

That makes sense, thanks.

They can't, but they can prevent a foreign company from doing business in the US (and from US companies doing business with a foreign company)—which is what they're doing.

Bytedance (TikTok) can "work around this problem" by selling their US business to a US company—which is what they're doing.

It's shady, completely legal, and fully up to the President/executive branch (e.g. Trump) to set policies in this area.

They've banned US transactions with the company. This means TikTok can no longer publish to Play Store/App Store. Android users could sideload an APK but that's still a huge blow. Lastly a social media app operating in the US that can't sell ads to US marketers is pointless.

As an alternative, Trump proposed letting a US company buy TikTok to get around the ban. As you'd expect, TikTok's investors are looking for a sale so they don't lose their investment.

They also can’t pay staff in the us or have bank accounts. Once us banks ban someone the rest of the world (except a few like China and Russia) usually follow for fear of the ban coming to them next.

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