The News
A U.S. government panel has told TikTok that its Chinese owners, ByteDance, need to sell its stake in the viral video app or risk being banned, The Wall Street Journal reported.
No final decision has been made and discussions between TikTok and the Committee on Foreign Investment in the United States, which reviews deals involving overseas investors for national security concerns, are ongoing, people familiar with the matter said.
“If protecting national security is the objective, divestment doesn’t solve the problem: a change in ownership would not impose any new restrictions on data flows or access,” TikTok spokesperson Brooke Oberwetter said. “The best way to address concerns about national security is with the transparent, U.S.-based protection of U.S. user data and systems, with robust third-party monitoring, vetting, and verification, which we are already implementing.”
ByteDance didn’t respond to a request for comment.
Step Back
An attempted forced sale would put TikTok back to where it was in 2020 under the Donald Trump administration, which pushed for a deal amid similar concerns about access to data by the Chinese government.
At that time, Microsoft was in talks to acquire TikTok’s U.S. operations for up to $30 billion ahead of a deadline imposed by the Trump administration to carry out a sale. But Beijing criticized the deal and ByteDance, whose founders and workers own about 40% of TikTok, rejected the sale to Microsoft.
Then a compromise was reached to sell a minority stake in TikTok to Oracle and Walmart, which was initially praised by Trump. But he later questioned the deal amid Republican criticism that it would still be under Chinese ownership, and the deal was put on hold indefinitely.
A Trump effort to ban TikTok by removing it from the app stores of Apple and Google was rejected by U.S. courts.
Now What?
A forced sale would put the ball back in China’s court and tensions with the U.S. have only increased since Trump left office. A Chinese Foreign Ministry spokesman said Thursday that the U.S. government hasn’t been able to prove that TikTok is a threat to America’s national security.
This time, the Biden administration will likely reject a minority stake sale in TikTok. Meanwhile, a bipartisan plan in Congress would give the U.S. government the power to effectively ban the app, piling more pressure on the firm.
At the same time, TikTok has been working on its own plan to address security concerns by moving and storing U.S. data to servers based in America. But that idea has been met with skepticism by members of Congress.
TikTok’s CEO Shou Zi Chew is scheduled to testify before Congress next week.