In a nutshell: The US government is pressuring ByteDance to sell TikTok over national security concerns. TikTok has offered a $1.5bn security plan to protect user data from Chinese government influence, but the Biden administration demands a change in ownership. Will ByteDance sell or risk losing 100 million US users?
The Whitehouse has demanded that TikTok's Chinese owners divest themselves of the company, or it will ban the popular app in the US. The Biden administration has had a contentious relationship with TikTok owner ByteDance for the last few years, having barred the app on government-owned devices over national security concerns.
On Wednesday, anonymous insiders told The Wall Street Journal that the Committee on Foreign Investment in the US, or Cfius (pronounced sif-ee-ous), made the demand recently after criticism that the administration was not taking the threat to national security seriously enough. Divestment would mean that Beijing-based ByteDance would essentially have to sell TikTok to someone outside of China.
According to TikTok, worldwide investors own 60 percent of the company. Its founders, Zhang Yiming, ByteDance Chief Executive Liang Rubo, and others, own 20 percent, including most of the voting shares. Employees another 20 percent through stock options.
The company claims that forcing the sale would not alleviate the Biden administration's perceived security risks.
"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," said TikTok spokeswoman Brooke Oberwetter.
Instead, TikTok offers an alternative by pledging $1.5 billion to implement a system to protect US customers' personal information and platform content from Chinese government influence and data collection.
"The best way to address concerns about national security is with the transparent, US-based protection of US user data and systems, with robust third-party monitoring, vetting, and verification, which we are already implementing," Oberwetter said.
Indeed, Reuters notes that TikTok finished migrating US user data to stateside Oracle servers last June. ByteDance hoped the transfer would satisfy Washington's security concerns, but it appears it hasn't. TikTok CEO Shou Zi Chew is scheduled for a grilling in front of Congress next week.
The Biden administration and the Treasury Department, which heads Cfius, declined to comment on the alleged divestiture demand. However, the stance taken by US officials has been unequivocal for over two years.
Senior US officials, including Deputy Attorney General Lisa Monaco, continue to raise alarms about China's national security legislation. The law mandates that Chinese-owned companies surrender customer data upon request, making Washington worry about potential surveillance by Beijing. The officials argue that even if TikTok implements its promised $1.5 billion security plan, the Chinese-owned company would still be at risk of data breaches and manipulation by the Chinese government.
Image credit: Anthony Quintano