In order to prevent a potential ban on the video-sharing app in the United States, the Biden administration is reportedly pressuring the service’s Chinese owners to sell their shares. It’s a significant policy shift for the administration, which has come under fire from some Republicans for not taking a tough enough line against TikTok, which is controlled by ByteDance Ltd. from Beijing.
According to the sources, the request for the sale came from the Committee on Foreign Investment in the United States (Cfius), a government task force made up of numerous agencies responsible for monitoring potential national security threats posed by foreign investment.
TikTok officials said global investors own 60% of ByteDance, employees own 20% and founders own 20%; nevertheless, the shares of the founders have disproportionate voting rights, as is generally the case in the technology industry. It was established in Beijing in 2012 by Zhang Yiming, ByteDance CEO Liang Rubo, and others.
In a statement on Wednesday, TikTok said a mandatory sale would do little to alleviate security concerns. Facebook has committed $1.5 billion to a program to protect user data and content in the United States from potential access or influence by the Chinese government.
“If the goal is to defend national security, divestment does not solve the problem: a change in ownership would not impose any additional limitations on data flows or access,” said the TikTok spokeswoman, Brooke Oberwetter, in a statement.
“The best way to address national security concerns is to provide transparent, U.S.-based protection of U.S. user data and systems, with full monitoring, control, and auditing by third party”, which is exactly what they do.
Cfius is overseen by the Treasury Department, which declined to comment.
It was reported by the Wall Street Journal that negotiations with Cfius over a way to secure TikTok data have been going on for more than two years and have been at an impasse for months, with officials from the Pentagon and the Department of Justice in the panel among those supporting a forced sale.
With its $1.5 billion security plan, TikTok believes it will effectively isolate its US operations, keeping all data in the country. The plan also includes granting Oracle Corp., a US firm, access to the firm’s algorithmic code to identify issues and report them to government auditors.
Opponents of the plan argue it is insufficient because any Chinese-owned company must give in to Beijing’s demands if they are made.
Future US moves were unclear and sources say a resolution could take months. TikTok CEO Shou Zi Chew will testify before the House Energy and Commerce Committee to answer lawmakers’ questions about the company’s security measures.
Based on identical national security concerns, the Trump administration tried to force the sale of TikTok to majority ownership in the United States in 2020. Nevertheless, when TikTok and ByteDance Ltd. challenged the planned ban in court, the initiative was blocked. The companies claimed the restriction would run counter to the Berman Amendments, which prevent the president from using economic sanctions to address national security risks.
The road ahead could be long and rocky for the Biden administration’s action against TikTok. Since the Chinese government would not allow the TikTok algorithm to be sold with it, the company can argue that any forced sale would amount to a ban. It’s possible the company could also argue that the change would be illegal under the First Amendment and the Berman Amendment.
The timing of Cfius’ action coincided with the introduction of a bill in the Senate that would give the government more legal clout in the face of what it sees as a threat from foreign-owned apps.
The bill introduced by Senate Intelligence Committee Chairman Mark Warner (D-Va.) and Senate Republican Whip John Thune (RS.D.) would require the Commerce Department to establish processes to mitigate the risks and potentially banning foreign technology.
If so, this could lead to the suspension of access to a given service or platform. It didn’t take long for members of the Biden administration to sign the bill into law.
National Security Adviser Jake Sullivan said in a statement that the legislation would give the United States government the ability to prevent “certain foreign governments” from exploiting technology services operating in the United States in a manner that endangers the personal information and national security of US citizens.
Karine Jean-Pierre, the White House press secretary, recently declined to comment on whether or not Vice President Biden would ban TikTok if the law were passed giving him the right to do so. Nonetheless, she acknowledged that the White House had “concerns with this particular app.”
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