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.
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.
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...