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The forthcoming Conversation features a Bloomberg Intelligence Spotlight webinar from January tenth titled the TikTok Band Will It Happen? In the webinar, Elliott Stein joined me Matt Shettenhelm to discuss TikTok's January tenth and oral argument at the US Supreme Court and whether the company can dodge a US band that's set to take effect on January nineteen. Please enjoy Okay, Good afternoon, everyone, and welcome to this Bloomberg Intelligence Spotlight webinar,
The TikTok Ban Will It Happen? My name is Matt Schuttenhelm. I'm a litigation and policy analyst with Bloomberg Intelligence focused on the TMT sector, and I'm joined today by our litigation and policy team leader, Elliott Stein. Elliott, thanks for doing this with me today.
My pleasure. Thanks for having me, Mett.
Yeah, absolutely so a couple housekeeping notes before we begin. Today's presentation will be recorded and will be available for playback. You can ask us a question by submitting one in the Q and a box on your screen. After the webinar, we're available for further questions. You can reach us through the Bloomberg terminal.
And let me just add a brief note about Bloomberg Intelligence. BI offers independent research, analytics and interactive data on the Bloomberg Terminal. Our team of over five hundred professionals works to help our clients make informed investment decisions. We cover companies, industries, and markets from the perspective of strategy, equity, credit, ESG, government, and litigation. So when we turn to today's topic, we thought we'd structure it as a Q and A session
to walk through Matt's analysis of the case. We'll look at what's at stake, who's likely to prevail, when and how Matt thinks will hear from the Supreme Court, and what President elect Trump might do about all of this once he takes office. As Matt said, if you have any questions, you know, throughout this discussion, just put them in the Q and A chat and we'll tackle them at some point during the conversation. Matt, before we get to your high level takeaways from the argument, you were
in the courthouse today at the Supreme Court. It's always exciting for litigation analysts like us. You know, some of the best lawyers in the country, one of the most high profile cases you know presently. So why don't you give us this sort of your high level view of what it was like in the courthouse today.
Oh, it was fantastic. I you know, I had the seat right behind the podium there, so I'm staring down the Chief Justice as as he's he's asking these questions to the best lawyers in the land. So there's no better seat in Washington, d C. And so it's so great fun to be there. And I think we got a lot to talk about.
Yeah, absolutely, and we'll grow into the details during this conversation, But why don't we start with your high level takeaways. You followed the case from the get go. You were, like we said, in the courthouse this morning You went into today's hearing saying that TikTok had a chance to win this case and stopped the January nineteenth ban, but you didn't think they had a great chance. You put it at thirty percent going in. Where are you now after the argument?
Yeah, it went a lot how I thought it would go, But I think I've reduced the odds after the argument. I'm down to twenty percent for TikTok. It's just very difficult to see five justices voting in TikTok's favor, both on the pause of the law and on striking the whole thing down. As you listen to the questions from the justices, only I could see TikTok winning one solid vote. Justice Gorsic seem to be a vote in the company's favor, But then it's a lot harder to get to five
for TikTok. On the other hand, it's much easier to get to five for the United States. With Chief Justice Roberts, I think most likely going to be in the majority, so he'll likely decide who gets to write the decision. Justice Barrett, who earlier this year had suggested maybe foreign companies don't have First Amendment rights in the same way as other social media companies. I think she was hitting
that note again. And then you can add, you know, three or four other justices pretty easily on the United States side. So if I'm TikTok, I'm pretty concerned coming out of that, out of that argument, I'm at twenty percent, and that might be high in terms of TikTok's chances going forward.
And we'll, you know, we'll discuss in detail why you think that some more. But maybe just to make sure everyone's on the same page on this call, why don't you maybe walk us through how the law operates, what it does to TikTok, and how it affects other companies.
Yeah, so at a high level, January nineteenth is the date to know, the one that matters, because when Congress passed this law in April, it said two hundred and seventy days later, that's when this ban takes effect unless bitingts has divested TikTok by then, and no divestiture has happened. And so here we are, January nineteenth, And what does a ban mean. So it's not a it's not going to strip it off everyone's phone on January nineteenth. What
happens on January nineteenth. Is that any company that hosts TikTok in an app store or on a server in the United States in a way that makes it available for Americans to update and maintain faces liability if they continue to host TikTok to allow that on January nineteenth. The liability is massive. It's five thousand dollars per user. One hundred and seventy million users times five thousand dollars
is eight hundred and fifty billion dollars. So it's the kind of number that companies need to pay attention to because they don't want to deal with with potential liabilities. So companies like Oracle that that host TikTok, companies that that other companies that carried in the app store, so Google, Apple that carry it there to the extent that it's using cloud services from Amazon or other companies like that, those companies would face potential liability starting on January nineteen.
So it sounds like TikTok is sort of seeking two things, right. They want an injunction to stop the January nineteenth deadline, and they want the court to strike down the law completely on the grounds that violates the first Amendment. You sort of gave us your high level thoughts on both those things at the outset, but maybe you can walk us and walk us through in more detail why you don't think TikTok will get to support a five justices, right.
Yeah, And that came up at the end. One of the justices raised the idea of a stay towards the end of an argument of the argument. The problem for TikTok is the standard for the court to issue a stay is really whether TikTok is likely to prevail in this case. So the two things sort of run together. Will they win in their constitutional challenge? And are they entitled to a stay? Because the test looks always does
TikTok have a serious case here? And as I said, it doesn't look like there are five justices that are going to say there's a First Amendment problem with this law that justifies striking it down. And for that reason, a stay, which would pause Congress's deadline isn't very likely because those justices are looking at the same question, is TikTok going to prevail on its First Amendment challenge? And so I think TikTok is likely to lose on both And I think they're both likely to go in the
same direction. We could talk about an administrative stay.
I don't know.
We can get to that later if you want in.
The way I mean, maybe want to just suddress that now, because because I guess it's two different things, right, an administrative stay versus preliminary injunction. And I know likelihood a success of the merits on the merits is the standard for one of the elements of getting an injunction. But is that also, you know, one of the elements for an administrative stay or does something else.
Playing I don't know that there are clear elements for an administrative stay. And maybe the Court uses administrative stays for housekeeping purposes, and you know, it's trying to do its work as fast as it can and sometimes it has to temporarily hit pause on things. I think the court, you know that did come up today, can can we
can we issue an administrative stay? I don't think the Court is going to be inclined to go down that road and and to issue an administrative stay because President Trump asked for it or or or something along those lines. You know, the fact that they're considering a stay and denying it. You know says a lot, and I don't think they're going to want to go down the road of creating a precedence of doing you know, administrative stays.
For that reason, it's possible they could try to kick it a couple of days into the Trump administration using this this this procedure. I don't want to say that's it's absolutely not going to happen. But again, I think you need a majority of the court to do these things, and you didn't really have a majority of the court to do it. The other thing is, I'm not and we can talk about this later as as president we
talk about President Trump. But even if they did kick it into President Trump's term, I'm not so sure there's a lot he can do to say we get it into President Trump's term. What exactly is that going to change as a practical matter, when you talk about the liability exposure we we mentioned earlier, I'm not sure it changes very much. But we can get into that too.
Yeah, let and let's send a Trump and what he might be able to do in a minute, But just on on the merits of the case, on what you heard today on the amendment arguments, Why don't you think there's five justices that would side with TikTok.
It was a lot like what we saw at the DC's circuit when this was argued in September. There was just a sense, like, you know, there really wasn't a sense that this is a major First Amendment crisis for our country because of the unique circumstances. This is a company that is the parent company is located in China, and as the government made the argument to the justices, the idea that look, we're not trying to change anything
about how TikTok speaks or how its users operate. They can use the same algorithm on December I'm sorry, on January twenty fifth as they do today if they want to don't. We just don't want it owned by a parent company in China. And Justice after Justice seemed inclined to defer to the government on that and say, look, this is sort of a narrow issue we're addressing here. This is about corporate structure, foreign ownership. It's not about uh,
you know, regulating social media companies generally. It's about the foreign ownership there. That caught on a lot more with the justices than did any concerns about how the First Amendment issues that that this law raises.
And what what about TikTok's arguments which they sort of focused on at the very end in the in the summary rebuttal that that there are less restrictive alternatives that that the government could have taken. If it were concerned with you know, data privacy, it could have just said, well, you know, you ban the transfer of data from TikTok to bydance or something like that. And you know, if you were concerned with covert manipulation, you could just have risk disclosures.
Yeah, TikTok's always had strong arguments in my view. You know, it's a serious First Amendment case. Did Congress really need to go this far? You know, a band's a big step or an effective band, whatever you want to call it. Did they really need to go this far? When I first came to this case, you know, you read these briefs and you say, hey, this is a decent argument.
Maybe the judges are going to make Congress rethink this and do it over make sure they got it right at least, and really think about did they need to
go that far? You just haven't seen that catch on despite its potential appeal to you know, in legal circles, the judges kind of maybe it's because it's so rare for Congress to agree to something like this on a bipartisan basis, and we had such a strong consensus that this needed to happen for national security reasons that I think judges are a little concerned to get in the
middle of that on legal technicalities. And so I think there's a real reluctance to stop a national security law if that's Congress's judgment, and so I just it's a serious argument. It just hasn't really caught on.
All Right, So let's talk about timing and what you think happens next. When do you expect that we'll see your decision from the Supreme Court?
Yeah, so this is such a unique case that usually we can, you know, we can give you averages on exactly how long the court takes for these things and really give you a really clear idea. This is so unique that the Court took this case on such a fast track schedule and they're facing this January nineteenth deadline, and they're they're balancing both that the stay issue and
the merits issue. That it's hard to know exactly, but my best sense is that what I think they'll they'll try to do, and what might be easiest for them to do, is to very quickly address the stay issue that the ban taking effect on January nineteenth. TikTok has asked them to pause. That the Court is meeting in a conference today after the argument in their private conference, and very often after those private conferences, they the next Monday put out an order list that addresses what they
talked about in that conference. It wouldn't surprise me at all if they release an order on the stay coming out of this afternoon's conference. One thing to watch for, and I kind of want to watch the headlines as they're coming in. When things are urgent, sometimes the Supreme Court won't wait till Monday. Sometimes they'll they'll put them
out Friday afternoon. And there is real urgency here. The TikTok said, Look, we have all these companies trying to figure out what do we do about January nineteenth, and so there is an urgency. So I think there's a possibility that the Court very quickly releases an order on
that stay as early as this afternoon. The other alternative that I can't rule out is that they try to address the full First Amendment question and write a full opinion on whether this violates the First Amendment by January nineteenth. That's possible. The Court typically takes over one hundred days after argument to issue a decision. We're probably going to have a dissent from Justice Gorsic in this case, and
balancing those things takes time. So writing an opinion that sets the First Amendment law going forward is going to be real tough for the Court in the next nine days or so, So that to me, isn't the most likely path. Much more likely I think that they address the stay first with a short decision saying no, we are not going to hit pause on January nineteenth. Then they can take their time get these legal details right on the First Amendment. Address that in March April May.
And if they don't pause it, I mean, that's a pretty big clue to how they're.
Going to rule exactly exactly.
All right, Let's talk about President President elect Trump and what he might do. He's said he has a warm spot in his heart. I think that's a quote for TikTok because it might have helped him win the election. He also filed an amicus brief in this case, which is pretty unusual, asking the Supreme Court to halt the law so that he can resolve the issue through political means, saying that he wanted to pursue what he called a negotiated resolution. You know, how did that come up in
the argument today? Did it get any attraction with the court And do you think it'll have any effect?
Yeah, it did come up pretty directly. I think it was just this Kavanaugh that that that may have raised it about midway through. Maybe Justice Alito mentioned it as well, but and also the Solicitor General mentioned it in her in her response on this and and I think, as I said earlier, the problem when President Trump filed that amikis brief, he didn't make a legal argument. The Court is into legal arguments. It does it does things based
on the law. And he told the court how great he is on social media, but he didn't really give them a path legally to issue a stay. And so that came up today and whether they you know, they could just push it to the next administration. And the Solicitor General said, well that the standard for a stay is is TikTok likely to prevail on the merits and and and there, I think TikTok's going to have a
tough time prevailing on the merits. And so, you know, judges love kicking things to the political branches and avoiding having to decide cases if they can, If they could get a political resolution of this case, I think they would love that. But I don't think that that instinct or that impulse is enough to justify overriding a deadline
that Congress sets. It's not the judge's job to change, you know, to set a new deadline that that's different from the one that Congress set for national security reasons. So I don't really see that leading to a change. And as we talked about earlier, an administrative stay is possible that sort of kicks it into the next administration while the court writes this up. But then there's real questions about what could President Trump do at that point.
Yeah, so let's talk about that, and let's sort of operate under the assumption that you're right, because you usually are. And the Supreme Court ruled against TikTok, doesn't issue a stay of the January nineteenth, date, the band takes effect on that day. President Trump comes into office. The next day, January twenty, what if anything, can he do to try to step in and save tik Tok.
Yeah, so it's a great question. He first of all, the law is enforced by the Justice Department, and President Trump will be in charge of the Justice Department. So he could tell his Justice Department, look, I'm not you know, we're not going to enforce this. And he could tell all the companies that face those hundreds of billions of dollars in liability, don't worry about that. It's not a concern.
And then there was, you know, some question that came up at the court today, if if they reversed him, if he reversed himself on that, would they have a due process claim? And maybe is the question is is the resolution is the answer on that? So the but then Justice Soda Mayor asked, I think they pushed back and said to this Solicitor General, what what is the statute of limitations on that? And I think the response was five years, which, you know, maybe we get into
the next of the next president. And so all of it. It's if I'm a company facing hundreds of billions of dollars of liability exposure and you're dealing with the president who sometimes changes his mind or sometimes likes to use leverage against you. I'm not going to take that on. And so this law does have a provision that allows a ninety day extension of the president to issue a
ninety day extension of that January nineteenth deadline. It's not entirely clear though, that you can extend after January nineteen once the law is in place. Maybe he can extend it after it's already in place, but it's much clear that President Biden could extend it today. The problem is the law says you can't just extend an agreement there extend the ban because you want to. You have to extend it because ByteDance has shown that it's entered into
an agreement to do a divestiture. So that would have to apply for President Trump to use this extension power, even if he could, even if you can grant an extension of something that already took effect. And all of this turns on whether the companies are willing to gamble that Trump is right that he can extend it, and that that they're not going to at least a crew theoretical billions of dollars of liability on that date. If I'm a company facing that sort of risk, I'm not
sure I can take my chances. Even if I want to appeal to the new administration and let him, you know, try to save the save the app, I'm not sure I can take on that risk.
Yeah, So let's talk about what it means practically for some of these companies. First of all, you know what companies are we talking about? If Trump can't stop the law from operating, you know, what does it mean for the companies that host TikTok, companies that compete with TikTok, people who use TikTok, and what companies are we talking about?
Yeah? So, I mean, I think you're you're thinking about a major op opportunity for TikTok social media competitors in the United States, And you're talking about YouTube shorts, You're talking about Meta's products, all those all those users, one hundred and seventy million users are going to need to go somewhere as a we should caution though. I think you're going to see social media posts on TikTok on
January twenty first saying look nothing happened. You know, look I'm still here, and but it's very possible that that even with you know, these changes, TikTok tries to host outside of the US. As I said, it doesn't immediately strip the app off people's phones, but I think I think there's likely to be a decline. You know, the companies have said it in various ways. TikTok said, I think they was going to lose something like twenty five
percent or in that ballpark of its revenue. With a thirty thirty day band it would lose a quarter of its revenue, something like a quarter of its users. So it's just big opportunities for TikTok's leading social media competitors in the United States. In terms of risks, there's risks, as I said, for all these companies that host the app currently, Apple and Google in their app stores probably
want to think about whether they want to keep doing that. Oracle, which hosts the app on servers now, potentially Amazon or other companies that host it in the cloud in the United States face potential liability.
Great, I'm just looking through the Q and A right now. Okay, sorry if I'm not able to summarize the questions because I'm looking at them for the first time. I had heard that If the January nineteenth law goes into effect, the most noticeable effect would be the app disappearance from the app store, given the penalties on app store providers. However,
you mentioned ISPs also being at risk for penalties. Does that mean it's likely that ifs COTUS does not intervene, that TikTok will be effectively wiped from the US internet and devices. Thanks for the great coverage, this person says.
Oh, okay, that's nice. There's a question about Internet service providers generally, whether they're subject to the law. I've seen people arguing about that and whether you know, if you're going to get forget the app, if you're going to try to go you know, using other ways, just using your internet service provider, is it a risk to those companies. The law is not very clear on that, and it's certainly true that look, January nineteenth is not TikTok disappear
from the world day. TikTok could come up with workarounds oracles hosting in the United States, they maybe they can shift that to Canada or some other place. The law only applies to to operations in the United States. But if I'm a competitor to TikTok. I'm certainly going to play up the risks of continuing to use the app after January nineteenth, the idea that Congress said, look, you you can't maintain or update this app anymore after January nineteenth in the United States? Do you want to keep
using that? I got to think for competitive reasons, some companies have an incentive to play that up. And then there's this questions of practically with the hosting. I think there's other hosting in the cloud that probably on the back end is going on in the United States. I think that could be disruptive on its own. So yeah, don't think of it as go dark immediately, although there
was some language about that in the argument today. I'm not sure that it will go dark immediately, but I think it's going to be a major change for the system going forward.
And here's the question that has to do with the algorithm. Can't TikTok just sell the US brand in the one hundred and seventy million users, but not the algorithm. This person doesn't see bike Dance selling the algorithm, you know, instead maybe taking it right down of the of one hundred and seven million users.
That's that's a possibility. So right now we've had no indication that byte edance is willing to do anything, and and so is it willing to leave all that on the table and not do any deal. It would be a surprise, I think if they said, oh, we're not going to do anything. So that is one way to do it. If if China won't approve the sale of an algorithm, they can they can sell all the other pieces.
It's going to at least if you believe the argument that TikTok made today, the algorithm is what makes TikTok TikTok, and and so there there's there's at least a question of whether TikTok is going to be the same if it continues with the same users and the same website but and the same name, but but not the secret sauce that makes it run. But that's absolutely a possibility
under the law. The big unknown is whether China byte Dance is willing to bite Dance, is whether they're willing to go there with that sort of sale.
And one last user question, this has to do with a sort of a federalism question. Trump's in charge of dr J, of course, but he can't really control what states do. So do the states have their do the states have to do their own ban if they wanted to ban from their state, since the federal government wouldn't enforce it. If the federal government doesn't enforce it under Trump.
Yeah, I mean, I guess that's that's a possibility that this this whole saga started Montana, I think past the first man of TikTok And and I think that the courts, you know, had had some issues with that because in part because look, this is better suited for the federal government to address on a national scale. But that's a possibility. We've seen that in other areas as the federal government is pulling back on its regulation, the states stepping up theirs.
So that's that's that's a creative idea. It's it's a possibility going down the road. But I'm not sure that that. I'm not sure the federal government can really pull this away. The legal way to do that is for Congress to step back in and if President Trump could go to Congress and convince them, look, we made a mistake on this whole band thing. Let's let's push it off for a year or something along those lines. That's the that's
the way to address this, if you know properly. The hard thing is this passed by such overwhelming bipartisan you know, measure, but such a bipartisan measure that I'm not sure Trump could could do that. I'm not sure you'd want to spend the political capital to do that. So I think the federal regime is likely to stay in place because of the concerns about the liability exposure that those companies are going to see no matter what Trump says about warm spots in his heart.
And that's it for the Q and A man.
Okay, Okay, great, So I think that's it today. If there are more questions, please reach out to Elliott or or me at any time on the Bloomberg terminal. Thank you so much for joining us today and hope to see you again sometime soon.
M Yeah,