The Biden administration has asked TikTok’s Chinese owners to sell their stake in the video-sharing app or risk the app being banned in the United States, according to people familiar with the matter.
The move marks a major policy shift in the U.S. administration, which has been criticized by some Republicans for not taking a tough enough stance to address the security threat posed by TikTok. TikTok is owned by Beijing-based Bytedance Ltd.
The sale of the stake was recently requested by the Committee on Foreign Investment in the United States (CFIUS), the people said. CFIUS is a multiagency federal task force charged with overseeing national security risks in cross-border investments.
TikTok executives have said that 60% of ByteDance’s shares are held by global investors, 20% are held by employees, and the other 20% are held by founders. Still, the founders’ shares carry excess voting power, as is common in technology companies. In 2012, Zhang Yiming and ByteDance CEO Liang Rubo founded ByteDance in Beijing.
TikTok said on Wednesday that the forced sale of its holdings would not address the so-called security risks. The company has pledged to invest $1.5 billion to protect U.S. user data and content from Chinese government access or influence.
TikTok spokesman Brooke Oberwetter said in a statement that if protecting national security is the goal, the divestiture would not solve the problem because the change in ownership would not impose any new restrictions on data flow or access.
“The best way to address national security concerns is to protect U.S. users’ data and systems in a transparent, U.S.-based manner with robust third-party oversight, review and verification, and we are already implementing these measures,” Oberwetter said.
The U.S. Treasury Department, which leads Cfius, declined to comment.
According to a previous report by The Wall Street Journal, negotiations with Cfius on how to ensure TikTok’s data security have lasted for more than two years and have been stalemate for several months, including the U.S. Department of Defense and Justice in Cfius. Some, including representatives of the ministry, supported the forced sale.
Deputy Attorney General Lisa Monaco and other senior U.S. officials have repeatedly cited China’s national security law as fueling their concerns. The law requires companies doing business in China to hand over user data when requested.
“Our intelligence community has always been very aware of China’s efforts and intentions to use data to shape the use of this technology, a worldview that is completely at odds with ours,” Monaco said in an interview last month in response to questions about TikTok.
TikTok stated that the above-mentioned $1.5 billion security plan will actually build a fence for its business in the United States, and all data will be stored in the United States. The plan also calls for giving Oracle Corp. ( ORCL ) access to TikTok’s algorithmic code and pointing out problems it finds to government inspectors.
Critics say the plan is not strong enough, saying any Chinese company must comply if asked to do so by Beijing.
It’s unclear what next steps the U.S. will take, and people familiar with the matter said a solution could be months away. TikTok CEO Zhou Shouzi is scheduled to testify before the House Energy and Commerce Committee next week, answering questions from lawmakers on security matters.
In 2020, the Trump administration attempted to force the sale of TikTok to a U.S. majority-owned company based on similar national security concerns. But that effort ultimately stalled as TikTok and ByteDance filed court cases to block a proposed federal ban. TikTok and ByteDance argued at the time that the ban would violate a law known as the Berman amendment, which excludes cross-border information flows from the U.S. president’s use of economic sanctions to address national security threats. power coverage.
The Biden administration’s campaign against TikTok could also face a long and bumpy road. The company could argue that any forced sale would amount to an injunction because the Chinese government does not allow the TikTok algorithm to be sold along with its business. The company could also argue that the Biden administration’s move would violate the Berman Amendment as well as the First Amendment to the Constitution.
The Cfius request comes as U.S. senators are introducing legislative proposals that could strengthen the U.S. government’s legal repertoire to address threats posed by so-called foreign-funded applications.
The legislation, introduced by Senate Intelligence Committee Chairman Mark Warner, D-Va., and Senate Republican Whip John Thune, R-S.D., would require the Commerce Department to establish procedures , to reduce the risk of such applications and potentially ban foreign technology.
This may result in the banning of specific platforms or services in appropriate circumstances. The proposal quickly gained support from Biden administration officials.
“This legislation would empower the U.S. government to prevent certain foreign governments from using technology services operating in the U.S. to pose a risk to Americans’ sensitive data and our national security,” National Security Advisor Jake Sullivan said in a statement. .”
White House press secretary Karine Jean-Pierre did not say recently whether Biden would ban TikTok if the bill passes and empowers him. But she acknowledged White House concerns about the app.
“We want to make sure that the digital products and services that Americans use every day are safe and secure,” she said.
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