Reason Roundup

The Messy TikTok Sale Is What Happens When Governments Get Involved in Social Media

Plus: More red states may get legal weed, antitrust action against Google expected this week, the Cuties controversy, and more...

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xnaphotostwo265430 | Liu Jie Xinhua News Agency/Newscom
(Liu Jie Xinhua News Agency/Newscom)

Will America's favorite video app fall prey to executive overreach? It's looking more and more likely that it will.

Fans of the app (or just of freedom) hoped that President Donald Trump's arbitrary ban on TikTok—part of a techlash-y executive order prohibiting American transactions with Tencent Holdings, the Chinese company behind messaging service WeChat, and ByteDance, the entity behind TikTok—could be at least partially circumvented by a U.S. company buying TikTok. The American tech companies Microsoft and Oracle were both in talks about snapping up the popular video platform.

On Sunday, Microsoft announced that it was out of the running. "ByteDance let us know today they would not be selling TikTok's US operations to Microsoft," it declared.

"Oracle Wins Bid for TikTok in U.S., Beating Microsoft," announced The Wall Street Journal, with a range of other publications following suit.

But it's not at all clear that Oracle is in fact getting TikTok.

Chinese state media reported Monday morning that "ByteDance will not sell TikTok's U.S. operations to Microsoft or Oracle, nor will the company give the source code to any U.S. buyers," citing "sources." (ByteDance did not comment.)

"China released a revised catalogue of technologies that are subject to export bans or restrictions at the end of August, which means that ByteDance may have to obtain a license from the government to proceed with TikTok's sale to an American company," reports CGTN.

Note the may before have to obtain there—it's possible that this is the Chinese authorities puffing themselves up more than it is an insurmountable obstacle for ByteDance.

According to a recent lawsuit against Trump's TikTok order—filed by a former TikTok employee represented by constitutional lawyer Mike Godwin—ByteDance isn't based out of China anymore but rather the Cayman Islands, with TikTok headquartered in Culver City, California. "TikTok is neither owned, operated, nor controlled by China or the Chinese government. Indeed, TikTok does not even operate in China," states the suit.

In any event, "the clock is ticking on TikTok's fate," notes TechCrunch:

Beijing was ostensibly absent from ByteDance's negotiations with Washington in the early days, but that seems to have changed as the deal's deadline inches closer, with the U.S. government threatening to shut down the service in 45 days from August 6 (September 20) if ByteDance didn't find a local buyer for the company.

First, the Chinese government revised its export rules that could block the transfer or sale of ByteDance's recommendation algorithms, and now there's the state report refuting rumors that Oracle has secured the deal.

The acquisition of TikTok's U.S. assets has been rumoured to be for as much as $50 billion, according to reports.

ByteDance's rise to prominence is closely linked to its use of algorithm to serve up videos, memes, news articles and other forms of content across its family of apps. Machine learning does away the need for human curation and even social and interest graphs, forming virtuous cycles within ByteDance services—the more content one consumes, the better the apps get at predicting one's interest. The data-driven process transcends cultural differences, arguably why TikTok became the first consumer app from China to conquer the West.

The South China Morning Post reported today:

With a looming US deadline for ByteDance to sell TikTok's US operations, the source said: "The car can be sold, but not the engine.""The company [ByteDance] will not hand out source code to any US buyer, but the technology team of TikTok in the US can develop a new algorithm," the source told the South China Morning Post. The source, who did not want to be identified, said ByteDance had notified US authorities and potential bidders of the decision.

FREE MINDS

Five states to vote on lifting marijuana restrictions. Come November, "five more states could make it legal to buy weed for medical or recreational purposes," notes Politico. The matter will be left to voters in these states.

The biggest stakes are in New Jersey and Arizona, where polling suggests voters will back recreational sales.

If both measures pass, more than 16 million additional Americans would be living in states where anyone at least 21 years old can buy weed for any reason. That would mean more than 100 million Americans would have access to legal recreational marijuana sales, less than a decade after Colorado and Washington pioneered the modern legalization movement.

South Dakota and Montana could also pass recreational legalization measures this year. The former could become the first state to go from a total ban on weed to legalizing both medical and recreational sales, if voters back a pair of referendums.

Meanwhile, Mississippi voters will decide whether to legalize medical marijuana. Mississippi would join a recent wave of archconservative states—including Oklahoma, Arkansas and Utah—that have embraced medical sales in recent years.

"We're now working in very red states," said Matthew Schweich, deputy director of pro-legalization advocacy group Marijuana Policy Project. "If we win in Mississippi, Montana and South Dakota…it becomes more difficult for those senators to oppose legislation that allows their home states to implement laws the voters have approved."

FREE MARKETS

Antitrust action against Google expected this week. "The real Sword of Damocles for Big Tech could come as early as this week, when a supposedly free-market Trump administration could launch a landmark lawsuit against" Google, writes the New York Post's Charles Gasparino. "Barring something dramatic, [Google] will soon be the target of litigation brought by the Trump Department of Justice and many states' attorneys general for alleged antitrust abuses."

Their case is a big stretch:

Google doesn't fit the classic definition of an antitrust target by costing consumer money—it's a free service for consumers that makes much of its money on advertising. But what makes Google enticing for class warriors is its size ($1 trillion market cap), massive profitability and omnipotence as everyone's favorite search engine, which also allows it to allegedly play dirty.

It's been accused of skewing search results to advertisers and giving top billing to search results that favor progressive political thought, not to mention mining user data for its business.

Given the politics of the moment, Google may be the first, but probably not the last, tech company to get roasted at the hands of the government not for doing anything terribly wrong, mind you, but for simply being too big and successful and the latest whipping boy for politicians in both parties.

For more on tech companies and antitrust, check out this 2019 Reason cover story.

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