US threatens to ban TikTok if Chinese founders don’t Sell

TikTok says forced sale won’t resolve national security issues; its CEO set to appear before Congress next week.

TikTok says a forced sale will not address the perceived security risk. Picture: AFP

The Biden administration is demanding that TikTok’s Chinese owners sell their stakes in the video-sharing app or face a possible US ban of the app, according to people familiar with the matter.

The move represents a major shift in policy on the part of the administration, which has been under fire from some Republicans who say it hasn’t taken a tough enough stance to address the perceived security threat from TikTok, owned by Beijing-based ByteDance.

The Committee on Foreign Investment in the US, or Cfius — a multiagency federal task force that oversees national security risks in cross-border investments — made the sale demand recently, the people said.

TikTok executives have said that 60 per cent of ByteDance shares are owned by global investors, 20 per cent by employees and 20 per cent by its founders, though the founders’ shares carry outsize voting rights, as is common with tech companies. The company was founded in Beijing in 2012 by Zhang Yiming, ByteDance Chief Executive Liang Rubo and others.

TikTok said overnight on Wednesday that a forced sale wouldn’t address the perceived security risk. It has pledged to spend $US1.5bn on a program to safeguard US user data and content from Chinese government access or influence.

“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, ” TikTok spokeswoman Brooke Oberwetter said.

“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.”

The Treasury Department, which leads Cfius, declined to comment. The negotiations with Cfius over a way to secure TikTok’s data have been going on for more than two years and have been stalemated for months, The Wall Street Journal has reported previously, with Pentagon and Justice Department representatives on the panel among those supporting a forced sale.

Deputy Attorney General Lisa Monaco and other senior U.S. officials have repeatedly cited China’s national security law, which requires companies there to turn over customer data if requested, as fuelling their concerns.

“Our intelligence community has been very clear about China’s efforts and intention to mould the use of this technology using data in a worldview that is completely inconsistent with our own,” Ms Monaco said in an interview last month, in response to a question about TikTok.

TikTok says its $US1.5bn security plan would essentially wall off its US operations, with all data being stored in the US. The plan also calls for giving a US company, Oracle, the ability to access the company’s algorithmic code and flag issues for government inspectors.

Critics have said that plan isn’t sufficient, saying any Chinese-owned company must comply with demands from Beijing if called upon.

It wasn’t immediately clear what the next step by the US would be, and the people familiar with the matter say a resolution could be months away. TikTok’s chief executive, Shou Zi Chew, is scheduled to appear before the House of Representatives energy and commerce committee next week to address legislators’ questions on the security issues.

In 2020, the Trump administration sought to force a sale of TikTok to US-majority ownership, based on similar national-security concerns. But that effort ultimately ran aground when TikTok and ByteDance, went to court to block a proposed federal ban. The companies argued that the ban would violate a law known as the Berman amendments, which exempt cross-border communications from the president’s powers to address national security threats through economic sanctions.

The Biden administration’s move against TikTok could face a lengthy and bumpy road as well. The company can argue that any forced sale would amount to a ban, because the Chinese government wouldn’t allow the TikTok algorithm to be sold along with it. The company also might be able to argue that the move would violate the Berman amendment, as well as the First Amendment.

The Cfius move came at the same time that Senate members were rolling out a legislative proposal that could strengthen the government’s legal hand in dealing with perceived threats from foreign-owned apps.

That legislation by Democrat Mark Warner, the chairman of the Senate intelligence committee, and John Thune, the Senate Republican whip, would require the Commerce Department to set up procedures to mitigate risks and potentially ban foreign technology.

That could lead to a ban in appropriate circumstances for a specific platform or service. The measure was quickly endorsed by Biden administration officials.

“This legislation would empower the United States government to prevent certain foreign governments from exploiting technology services operating in the United States in a way that poses risks to Americans’ sensitive data and our national security,” National Security Adviser Jake Sullivan said.

White House press secretary Karine Jean-Pierre recently declined to say if Mr Biden would ban TikTok if the bill passed and gave him the authority to do so, but acknowledged the White House had “concerns with this particular app.” “We want to make sure that the digital products and services Americans use every day are safe and secure,” Ms Jean-Pierre said.

The Wall Street Journal