Murky TikTok deal raises questions about China's role

Murky TikTok deal raises questions about China's role
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A deal to avert a U.S. ban on TikTok appears to have been reached over the weekend, but several questions remain about the contours of the pending agreement.

The most pressing is what the role of the short-form video app’s China-based parent company, ByteDance, will have in the newly formed entity TikTok Global.

President TrumpDonald TrumpTrump announces new social media network called 'TRUTH Social' Virginia State Police investigating death threat against McAuliffe Meadows hires former deputy AG to represent him in Jan. 6 probe: report MORE suggested Monday that the deal could be in jeopardy if Oracle and Walmart — the two American companies involved in the proposal — do not have full control of the new TikTok.


“And if we find that they don’t have total control, then we’re not going to approve the deal,” he said during an appearance on “Fox & Friends.”

One of the next steps in the approval process includes a review by the Committee on Foreign Investment in the United States (CFIUS).

Without a term sheet being public, it is difficult to know the exact breakdown of the agreement, which was tentatively approved just before a Commerce Department order would have barred TikTok from appearing in U.S. app stores.

But from what is known, it appears that the deal falls far short of the full-on sale of TikTok to an American company that Trump originally called for in August. 

Together, Oracle and Walmart will take only a 20 percent stake in the new company, TikTok said in a statement over the weekend.

According to ByteDance, other U.S.-based TikTok investors like Sequoia Capital and General Atlantic will stay on in the newly formed company, which has an estimated value of between $50 billion and $60 billion.

Even with the financial stakes of four U.S. companies, it is difficult to envision a scenario where ByteDance entirely removes itself from involvement in such a successful video app.

In a statement Monday, ByteDance emphasized it will remain in control of the new TikTok business and, crucially, the recommendation algorithm that makes the platform so popular.

That position was directly contradicted by Oracle executive vice president Ken Glueck, who said Monday that “Americans will be the majority and ByteDance will have no ownership in TikTok Global.”

The discrepancy may be explained by ByteDance’s ownership of TikTok Ltd., a business incorporated in the Cayman Islands that currently owns TikTok’s American operations.

A spokesperson for Oracle did not respond to requests for comment on TikTok Ltd.’s involvement in the new company, which would functionally still mean ByteDance would have a stake.

The spokesperson also did not respond to questions about ByteDance’s claim that its founder, Zhang Yiming, will sit on the board of TikTok Global.

A TikTok spokesperson did not respond to questions about ByteDance’s new role.

As more details emerge about ByteDance’s involvement in the deal, the prospects of ultimate approval may shift.

All companies involved agree that the deal as currently structured would see Oracle becoming TikTok’s “trusted technology partner,” tasked with hosting all American user data and being able to access enough code to search for vulnerabilities.

Sen. Marco RubioMarco Antonio RubioHouse passes bills to secure telecommunications infrastructure Senators call for answers from US firm over reported use of forced Uyghur labor in China Republicans would need a promotion to be 'paper tigers' MORE (R-Fla.), one of the first lawmakers to call for a federal review of TikTok, told Fox News on Sunday that his concerns remain “no matter where the actual data is housed.”

“If there’s any opportunity whatsoever for China to continue to collect personal data on Americans, then we can't be supportive of that deal,” he said.

A deal where ByteDance remains involved would undercut the national security concerns raised in Trump’s executive order last month compelling TikTok’s divestiture.

Those national security concerns were based on a review by the interagency CFIUS, which still has to sign off on the agreement.

In his order, the president highlighted his concerns about the ability of the Chinese Communist Party to compel companies to turn over data for broad national security purposes, but that authority would not be stopped by the involvement of more American investors in TikTok.

A source familiar with the agreement with the CFIUS told The Hill in addition to having Oracle review code to ensure there are no security backdoors, the new company will have a committee of all U.S. citizens, including one with security clearance, to handle data privacy issues.


Additionally, a third party auditing company would submit continuous reports to the U.S. government on the company’s operations, the source said.

There has been no evidence of TikTok turning over foreign user data to the Chinese government.

The executive order also raised concerns about Beijing’s ability to use the app to spread its political messaging and reduce the reach of content critical of the Chinese government, something which would not be addressed if ByteDance retains control of the algorithm.

Whether American user data would be safer under the proposed deal is another issue.

Oracle is Silicon Valley’s preeminent technology provider for businesses, but it has a checkered past with data privacy.

Over the summer, Oracle-owned marketing cloud platform BlueKai left an unsecured database containing billions of records exposed.

Another lingering question pertains to the $5 billion that Trump told reporters Saturday TikTok would be making toward “education of the American youth.”


ByteDance initially said it was unaware of such a fund, Reuters reported on Sunday.

In a blog post titled “clarifying groundless rumors about TikTok,” ByteDance then contested Trump’s assertions, saying the $5 billion figure is simply an estimate of the amount of taxes TikTok Global would pay over several years if the proposal is approved.

Oracle said in its announcement that the new company would ultimately increase tax revenue in the U.S. by $5 billion.

Trump had suggested earlier on in negotiations that the Treasury Department should collect a payment for any deal. He recently backed down from that position, admitting that the administration had no authority to make that sort of demand.

The looming threat of China rejecting the deal remains present.

Shortly after Trump’s executive order, the Chinese Communist Party updated its export controls to include artificial intelligence technologies that likely include the TikTok algorithm, potentially giving Chinese officials the power to limit the algorithm’s use outside the country.

Hu Xijin, the editor-in-chief of Chinese state media outlet the Global Times, suggested Monday that Beijing would reject the deal in its current form. The Chinese Embassy in Washington did not immediately respond to a request for comment.

“Based on what I know, Beijing won't approve current agreement between ByteDance, TikTok's parent company, and Oracle, Walmart, because the agreement would endanger China's national security, interests and dignity,” he tweeted.

The Commerce Department on Friday set a Nov. 12 deadline for the deal to be completed before the app will not be able to operate in the U.S. Several key issues need to be ironed by regulators and lawyers before then.