TikTok Creators Turn to Lawyers to Navigate Looming US Ban (1)

Attorneys for creators profiting from posts on TikTok Inc.'s video-sharing app are developing strategies to renegotiate brand deals ahead of the Chinese-owned social media giant’s scheduled US ban this weekend.

ByteDance Ltd.’s TikTok faces a deadline of Jan. 19 to find a US buyer or cease operating in the country, and the Supreme Court Friday upheld the law signed by President Joe Biden in April imposing the ban. Barring an 11th-hour reprieve, tech companies starting this weekend would face massive fines for hosting the app, and TikTok’s attorney told the high court the platform would “go dark” if the law kicks in.

Almost $5 billion was spent on US influencer marketing in 2022, according to Goldman Sachs. Influencers who rely on TikTok as a critical part of that massive economy are concerned about an immediate downturn in revenue, said Nixon Peabody LLP partner Christina Chang. She said she’s working to protect them in existing agreements by adding language to explicitly address what happens if the ban goes into effect, including repurposing content for other platforms and mapping out how parties would negotiate a contract amendment.

Though creators’ paid posts intended for TikTok could easily publish on Meta Platform Inc.'s Instagram Reels, Google Inc.'s YouTube Shorts, or Snap Inc.'s Snapchat, brands might try to cut pay since those platforms don’t have TikTok’s prized algorithm, or smaller user bases. Shifting from TikTok to those platforms doesn’t deliver the same experience, said Nixon Peabody partner Ellie Heisler, who has represented creators including TikTok star Addison Rae and fashion designer and TV personality Tan France.

“It may be a different audience, it could be a less-engaged audience, and so the brand isn’t necessarily getting the same value in the deliverable if it doesn’t live on TikTok,” she said.

Brands and creators that have yet to flag the ban to attorneys might treat the prohibition like the Covid-19 pandemic and rely on contracts’ force majeure provisions, Chang said, which allow parties to duck their contractual obligations when unforeseen events make them impossible to perform.

The situation ahead of the deadline remains fluid. President-elect Donald Trump has said he opposes the ban going into effect, and Michael Waltz, his incoming national security advisor, said Thursday they would “put measures in place to keep TikTok from going dark.” Senate Democratic leader Chuck Schumer said on the Senate floor he will “work with the Trump administration and both parties to keep TikTok alive while protecting our national security,” but that TikTok should survive under new ownership.

TikTok Alternatives

The law would make it illegal for “an entity,” “marketplace” like a mobile app store, or “internet hosting services to enable the distribution, maintenance, or updating” of TikTok and other ByteDance products, and subject American companies like Apple Inc. and Alphabet Inc.’s Google to fines determined by “multiplying $5,000 by the number of users.”

Two Chinese-made social apps, Xiaohongshu and Lemon8, have jumped to the top of Apple’s iPhone download charts since the Jan. 10 Supreme Court argument. Creator and brand lawyer Adam Weissman said many clients announced they’re moving to Xiaohongshu, or Red Note as it’s become known in the US, and asked users to follow them there.

“If Red Note does get sufficiently popular, it’s just going to be the next platform on the government’s hit list,” he said.

Even though it’s not illegal for creators to access TikTok, Weissman said those who try to hold onto the app will probably face lower engagement because most users won’t adopt virtual private networks to access the platform by changing their geographical location online.

Brands will also have to consider the reputational effects of having sponsored content posted on a banned platform. Corporations that own brands “probably” don’t care whether their consumers’ personal information is acquired by China through TikTok absent legal ramifications, said Amanda Schreyer, an attorney at Morse, Barnes-Brown & Pendleton PC.

The looming ban should be a wake up call for creators to not rely on any single platform too heavily, attorneys said, adding that they’ve advised clients to diversify their audience and channels across platforms, websites, newsletters, or in-real-life events. Heisler said she’s also advised clients to back up all their content on TikTok and other platforms.

“Hopefully we see more and more of that because you can lose your entire audience and everything you’ve ever done in the blink of an eye,” Weissman said.

Contract Language, Negotiations

Because the TikTok ban was initially proposed in 2020, attorneys said some contracts have built-in conditional language.

Schreyer said she previously added language along the lines of, “If it becomes illegal for you to post these videos on TikTok, or you are otherwise technically unable to do so, then you’ll post them on Instagram.” But that the language was removed from templates when the ban seemed less likely, she said.

As the ban loomed closer, Chang said more contracts have specifically referenced it, mutually identified an alternative platform for posts, or detailed a good-faith amendment, if needed. If the parties can’t agree on an amendment, termination of the deal may include the forfeiture of fees that haven’t been paid out yet, partial refund, or a kill fee, she said.

“Whenever there’s disruption, there’s always going to be a renegotiation,” Heisler said. Brands could argue they should pay less for a smaller audience, she said, but creators could counter that the audience will be smaller for everyone without TikTok as an alternative, and they’re still doing the same amount of work.

Creators are hesitant to believe the ban will actually happen because it didn’t happen in 2020 under then-president Donald Trump’s executive order, Weissman said. If it does go into effect, he added, they will be in “a giant scramble next week to figure out what to do.”