*

Court decision will be appealed to the Supreme Court -

TikTok

CEO

*

DOJ says TikTok is a threat to national security and

should be

sold

*

Trump has vowed to prevent TikTok from being barred

(Adds TikTok CEO comment, Chinese embassy statement, closing

share prices, Google declining comment)

By David Shepardson and Mike Scarcella

WASHINGTON, Dec 6 (Reuters) - A U.S. federal appeals

court on Friday upheld a law requiring Chinese-based ByteDance

to divest its popular short video app TikTok in the United

States by early next year or face a ban.

The decision is a major win for the Justice Department and

opponents of the Chinese-owned app and a devastating blow to

TikTok parent ByteDance. It significantly raises the prospects

of an unprecedented ban in just six weeks on a social media app

used by 170 million Americans.

TikTok plans to appeal the decision to the Supreme Court.

In detailing their support of the law, the appeals court

noted it was the result of Republicans and Democrats working

together, as well as two presidents, as "part of a broader

effort to counter a well-substantiated national security threat

posed by the PRC (People's Republic of China)."

The Justice Department says under Chinese ownership, TikTok

poses a threat because of its access to vast personal data of

Americans, asserting China can covertly manipulate information

that Americans consume via TikTok.

Attorney General Merrick Garland called the decision "an

important step in blocking the Chinese government from

weaponizing TikTok."

But the Chinese Embassy in Washington called the law "a

blatant act of commercial robbery" and warned the United States

"must handle this case in a prudent manner to avoid harming the

mutual trust between the two countries and the development of

bilateral relations."

The ruling comes amid growing trade tensions between the

world's two biggest economies after the administration of

President Joe Biden placed new restrictions on China's chip

industry and Beijing responded by imposing an outright ban on

exports of gallium, germanium and antimony to the United States.

U.S. appeals court Judges Sri Srinivasan, Neomi Rao and

Douglas Ginsburg rejected legal challenges brought by TikTok and

users against the law, which gives ByteDance until Jan. 19 to

sell or divest TikTok's U.S. assets or face a ban.

FREE SPEECH

"While today's news is disappointing, rest assured we will

continue the fight to protect free speech on our platform,"

TikTok CEO Shou Zi Chew said in an email to staff seen by

Reuters.

Free speech advocates quickly criticized the ruling. The

American Civil Liberties Union said, "Banning TikTok blatantly

violates the First Amendment rights of millions of Americans who

use this app to express themselves and communicate with people

around the world."

In its analysis, the court said China, through its

relationship with TikTok parent ByteDance, threatened to distort

U.S. speech through TikTok and "manipulate public discourse."

China's "ability to do so is at odds with free speech

fundamentals. Indeed, the First Amendment precludes a domestic

government from exercising comparable control over a social

media company in the United States."

The decision -- unless the Supreme Court reverses it -- puts

TikTok's fate in the hands of first President Biden on whether

to grant a 90-day extension of the Jan. 19 deadline to force a

sale and then President-elect Donald Trump, who takes office on

Jan. 20. But it's not clear whether ByteDance could meet the

heavy burden to show it had made significant progress toward a

divestiture needed to trigger the extension -- or if the Chinese

government would approve any sale.

Trump, who unsuccessfully tried to ban TikTok during his

first term in 2020, said before the November presidential

election he would not allow the TikTok ban.

Friday's decision upholds the law giving the U.S. government

sweeping powers to ban other foreign-owned apps that could raise

concerns about collection of Americans' data -- and could open

the door to a future crackdown on many other foreign owned apps.

In 2020, Trump also tried to ban Tencent-owned WeChat, but was

blocked by the courts.

TIKTOK BAN LOOMS

If banned, TikTok advertisers would seek new social media

venues to buy ads. As a result, shares of Meta Platforms ( META )

, which competes against TikTok in online ads, hit an

intraday record high following the ruling and closed up 2.4%.

Google parent Alphabet, whose YouTube video platform

also competes with TikTok, closed up 1.25%.

The court opinion - which was written by Ginsburg, an

appointee of President Ronald Reagan, and joined by Rao, who was

named to the bench by Trump, and Srinivasan, an appointee of

President Barack Obama - acknowledged its decision would lead to

TikTok's ban on Jan. 19 without an extension from Biden.

ByteDance, backed by Sequoia Capital, Susquehanna

International Group, KKR & Co ( KKR ), and General Atlantic,

among others, was valued at $268 billion in December 2023 when

it offered to buy back around $5 billion worth of shares from

investors, Reuters reported then.

The law prohibits app stores like Apple ( AAPL ) and

Alphabet's Google from offering TikTok and bars

internet hosting services from supporting TikTok unless

ByteDance divests TikTok by the deadline.

Google declined comment while Apple ( AAPL ) did not respond to a

request for comment.

In a concurring opinion, Srinivasan acknowledged the

decision will have major impacts, noting "170 million Americans

use TikTok to create and view all sorts of free expression and

engage with one another and the world. And yet, in part

precisely because of the platform's expansive reach, Congress

and multiple Presidents determined that divesting it from

(China's) control is essential to protect our national

security."