The Biden Administration appears to be playing hardball, insisting TikTok’s Chinese parent company ByteDance divest the hugely popular video-sharing app in the U.S. According to the WSJ, it’s threatening a ban if that doesn’t happen.
In a statement obtained by Deadline, TikTok responded to the sale pressure. “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.”
“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,” it said. Whatever processes it has in place clearly have not allayed fears.
Former President Trump had tried to force a sale of TikTok, then to ban it, but lost a few rounds in court before letting the matter drop. Two separate judges ruled in the fall of 2020 against preliminary injunctions that would have made the app unavailable in app stores for new downloads. Earlier in his term, Trump issued an executive order requiring ByteDance to sell the U.S. piece of the platform to American owners. Microsoft made an offer but was turned down. The administration seemed to have approved a bid led by Oracle and Walmart, but that never happened.
Security concerns have, however, already resulted in the service being banned from the phones of employees across the federal government.
The Committee on Foreign Investment in the United States is again leading the charge. The Wall Street Journal, which first reported the story, said CFIUS has been probing whether the data of TikTok’s U.S. users is secure and that it wants TikTok sold or spun off from tech giant ByteDance with tensions between the U.S. and China on the rise.
TikTok’s CEO is set to testify on Capitol Hill next week.
CFIUS apparently doesn’t give any details of how the divestiture would look in practice.
“This is all a game of high stakes poker and clearly the Beltway is putting more pressure on ByteDance to strategically sell this key asset in a major move that could have significant ripple impacts,” said analyst Dan Ives of Wedbush Securities.
“This is a very complex situation as ByteDance’s ownership of TikTok and the golden jewel algorithm at the center of this security debate is a hot button issue that would not necessarily be solved just by a spin-off or sale of the assets. The partnership with Oracle was key to walling off this data and giving the US government comfort around access to consumer data being blocked into the Chinese and Beijing. Clearly these initial concerns have increased with the Biden Administration now laser focused on a fork in the road for TikTok,” Ives said.
Rivals like Snapchat and Facebook would be big beneficiaries of a TikTok ban.