By: Donald L Swanson
Being in business is risky. And the risks are ever-expanding.
The latest illustration of a new risk is the case of TikTok, Inc. v. Garland.
The new risk is for businesses using the TikTok social media platform: i.e., the U.S. Government can shut that social media platform down, based on national security concerns.
Business Risks
Conventional wisdom says that 20% of small businesses fail within their first year, 50% have failed within five years, and 70% have failed within ten years.
And large businesses face similar problems. Here’s an illustration, using Tom Brady’s 20 years Super Bowl career (his first Super Bowl appearance was in 2002, and his last was in 2022). Tom Brady’s Super Bowl career outlasted these businesses that advertised on TV in his first Super Bowl appearance:
- AOL
- Blockbuster
- Circuit City
- CompUSA
- Gateway
- RadioShack
- Sears.[Fn. 1]
What’s notable about this list of failed businesses is:
- each was capable of paying (presumably) the large amounts required for such advertising;
- each had sufficient confidence in the future to risk paying such amounts, with the goal of enhancing future prospects; and
- each failed in its own, unique way, such as by product obsolescence (e.g., Blockbuster) and business model obsolescence (e.g., Sears).
A New and Unusual Risk
But we now have an illustration of a new and unusual risk for businesses, in these social media days.
The new risk is illustrated in the recent TikTok development:
- i.e., there is a potential for termination of online business opportunities, through actions by the U.S. Congress and U.S. Supreme Court.
Many entrepreneurs in these United States have developed businesses around use of the TikTok platform.
And now, that social media platform is potentially banned in the U.S.
Supreme Court’s Explanation
Here is how the U.S. Supreme Court explains the situation in its opinion titled, TikTok, Inc. v. Garland, Case Nos. 24–656 and 24–657 (decided January 17, 2025):
- Congress enacted the Protecting Americans from Foreign Adversary Controlled Applications Act, which makes it unlawful to “distribute, maintain, or update” a “foreign adversary controlled application” in the United States;
- such prohibitions take effect 270 days after the Act’s enactment—i.e., January 19, 2025—but the President may grant a one-time extension of no more than 90 days;
- TikTok’s proprietary algorithm is developed and maintained in China and is subject to Chinese laws requiring that it be used to “assist or cooperate” with the Chinese Government’s “intelligence work,” making TikTok “an espionage tool of China”;
- regarding free speech issues under the First Amendment, the law does not target particular speech based upon its content—instead, it imposes “TikTok-specific prohibitions due to a foreign adversary’s control over the platform”; and
- the U.S. Government supports the law “with a content-neutral justification: preventing China from collecting vast amounts of sensitive data from 170 million U. S. TikTok users.”
Supreme Court’s Ruling
And here is the Supreme Court’s TikTok ruling, based on the record before it:
- “China has engaged in extensive and yearslong efforts to accumulate structured datasets, in particular on U. S. persons, to support its intelligence and counterintelligence operations”;
- “TikTok’s scale and susceptibility to foreign adversary control, together with the vast swaths of sensitive data the platform collects, justify differential treatment to address the Government’s national security concerns”;
- “Congress was justified in specifically addressing its TikTok-related national security concerns”; and
- “the challenged provisions do not violate [TikTok’s] First Amendment rights.
Bankruptcy Laws
The risks of being in business are real. And those risks are ever-expanding.
Businesses and their owners, who deal with business risks every day, need to have bankruptcy laws in place that are effective and reliable, to deal with the down-side of those risks.
Conclusion
Entrepreneurship is risky business.
And now we have a new-and-different risk: namely, social media business opportunities being, potentially, shut-down by the U.S. Congress and the U.S. Supreme Court for national security reasons.
And that is why we need effective bankruptcy laws in these United States–so that businesses can deal with the business risks, when things go wrong for them.
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Footnote 1. For a discussion of these businesses failures, see this article: Tom Brady’s Super Bowl Career—And A Lesson On Business Failures.
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