TikTok Divestiture Requirement Doesn’t Constitute a Taking of Private Property Under the Fifth Amendment

Besides challenging the law on First Amendment grounds, TikTok also raised a Takings Clause argument, but the D.C. Circuit panel unanimously rejected it:

TikTok claims the Act constitutes a per se regulatory taking in violation of the Fifth Amendment because it will render TikTok defunct in the United States. The Government counters that TikTok has assets that can be sold, and that the Act requires only divestiture, which need not be uncompensated. Although the Act will certainly have a substantial effect on the TikTok platform in the United States, regardless whether TikTok divests, the Act does not qualify as a per se regulatory taking.

The Supreme Court recognizes two situations in which regulatory action constitutes a per se taking: (1) where the government requires that an owner suffer a “physical invasion of [its] property,” and (2) where a regulation “completely deprives an owner of all economically beneficial use of [its] property.” TikTok’s argument is of the second variety, but it does not demonstrate the complete deprivation such a claim requires.

Here the causal connection between the Act and the alleged diminution of value is attenuated because the Act authorizes a qualified divestiture before (or after) any  prohibitions take effect. That presents TikTok with a number of possibilities short of total economic deprivation. ByteDance might spin off its global TikTok business, for instance, or it might sell a U.S. subset of the business to a qualified buyer.

TikTok dismisses divestiture as impractical. One of the main impediments, however, appears to be export prohibitions that the PRC erected to make a forced divestiture more difficult if not impossible. But the PRC, not the divestiture offramp in the Act, is the source of TikTok’s difficulty. TikTok would have us turn the Takings Clause into a means by which a foreign adversary nation may render unconstitutional legislation designed to counter the national security threats presented by that very nation.

In any event, TikTok has not been subjected to a complete deprivation of economic value. Beyond characterizing divestiture as impossible, TikTok does not dispute that it has assets that can be sold apart from the recommendation engine, including its codebase; large user base, brand value, and goodwill; and property owned by TikTok. In other words, TikTok has several economically beneficial options notwithstanding the PRC’s export restriction.

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