Forced TikTok Divestiture Does Not Constitute a Fifth Amendment Taking

The legal battle surrounding TikTok’s challenge to a U.S. government ban reveals a complex interplay of First Amendment rights, national security concerns, and the Takings Clause of the Fifth Amendment. TikTok’s primary contention against the ban, beyond First Amendment arguments, rested on the assertion that the government’s actions constituted a “per se regulatory taking” – a situation where regulation so severely restricts the use of property that it effectively amounts to a government seizure without just compensation. The D.C. Circuit Court, however, unanimously rejected this argument, finding that while the ban would undoubtedly impact TikTok’s U.S. operations, it didn’t meet the stringent criteria for a per se taking.

The court’s decision hinged on the established legal precedent defining per se takings. Such takings occur in two specific scenarios: when the government mandates a physical invasion of private property, or when a regulation entirely strips an owner of all economically beneficial use of their property. TikTok’s claim fell under the second category, alleging a complete deprivation of economic value. However, the court found that TikTok failed to demonstrate this complete deprivation, primarily due to the “divestiture offramp” provided by the Act. This provision allows for the sale or spin-off of TikTok’s U.S. assets before any outright prohibitions take effect, thus offering potential avenues for mitigating the economic impact.

The court highlighted the attenuated causal connection between the Act itself and TikTok’s claimed economic losses. The existence of the divestiture option, allowing for the sale of assets to a qualified buyer, presented alternatives short of total economic ruin. The court acknowledged potential difficulties with divestiture, particularly those stemming from export restrictions imposed by the People’s Republic of China (PRC). However, it attributed these difficulties to the PRC’s actions, not the U.S. government’s legislation. The court effectively argued that it shouldn’t allow a foreign government to use its own actions to invalidate U.S. legislation designed to address national security concerns posed by that very government.

Furthermore, the court emphasized that TikTok possessed valuable assets beyond its recommendation algorithm, including its user base, brand recognition, and other intellectual property, all of which retained economic value regardless of the ban. These assets presented viable options for mitigating financial losses, even considering the PRC’s export restrictions. The court’s reasoning underscored the requirement for a complete deprivation of economic benefit to qualify as a per se taking, a threshold TikTok hadn’t met. The availability of salvageable assets and the option of divestiture, however complicated by external factors, prevented the Act from being classified as a per se taking under the Fifth Amendment.

The court’s analysis carefully distinguished between the direct impact of the U.S. legislation and the indirect consequences of the PRC’s actions. While acknowledging the potential difficulties imposed by the PRC’s export restrictions, the court refused to attribute those difficulties to the U.S. Act itself. The core of the court’s decision rests on the principle that the Takings Clause cannot be weaponized by a foreign government to undermine U.S. national security measures. The court upheld the government’s right to protect national security interests while simultaneously recognizing the complexities introduced by international relations and the economic ramifications of such actions on private entities.

In essence, the D.C. Circuit Court’s ruling asserted that while the government’s actions would undoubtedly affect TikTok’s operations, they did not constitute a per se taking. The court emphasized the availability of the divestiture option and the existence of valuable assets that could be sold, even within the constraints imposed by the PRC’s export controls. This decision underscores the high bar for proving a per se regulatory taking and reinforces the government’s authority to enact legislation addressing national security concerns, even when such legislation impacts the economic interests of private companies.