Under pressure from the US government, TikTok’s music now faces the possibility of a nationwide ban if it defies a government order to sell it to an American company – unless the popular social media app can get a high-profile panel on its data security convince restructuring plan adequately protects against national security concerns.
At the heart of this social media business and national security drama is the increasingly strained US-China relationship.
Best known for quick snippets of viral dance routines, the video-sharing platform, which has 150 million US users, has come under scrutiny for years from federal agencies who say its Chinese parent company ByteDance may be sharing sensitive user data with the Chinese government. or spread propaganda and misinformation on his behalf.
Having already banned certain tech from shipping to China and recently passed new legislation banning the app on government devices, lawmakers want to enforce a nationwide ban on the app if the tech company can’t be sold to an American buyer.
Enter: The Committee on Foreign Investments in the United States. The little-known but potentially powerful government agency known as the CFIUS is tasked with investigating corporate businesses for national security reasons and has the power to force the company to make changes.
WHY IS CFIUS STUDYING TIKTOK?
For at least two years, the US government has been trying to force ownership of TikTok to divest itself from its Chinese parent company ByteDance, though CFIUS’s review of the social media app dates back to at least 2019.
Former Treasury Secretary Steve Mnuchin confirmed in 2020 that CFIUS is evaluating whether then-President Donald Trump could ban TikTok in the US. Its members agreed that TikTok cannot operate in the U.S. in its current form because it “runs the risk of sending back information about 100 million Americans,” Mnuchin said at the time.
As geopolitical tensions between China and the US have soared in recent months, TikTok CEO Shou Zi Chew testified before the House Energy and Trade Committee last week. He was grilled in a hostile hearing about online safety and user privacy that did little to allay lawmakers’ concerns. Chew was repeatedly questioned about the Chinese Communist Party’s influence on ByteDance, but was rebuffed.
“TikTok isn’t available in mainland China, and today we have our headquarters in Los Angeles and Singapore, but I’m not saying that the founders of ByteDance aren’t Chinese, nor am I saying that we don’t use Chinese employees, just like many other companies around the world,” he added. “We use their expertise on some engineering projects.”
WHAT IS CFIUS?
Treasury Secretary Janet Yellen oversees CFIUS, a committee made up of members from the State, Justice, Energy and Commerce departments, among others, that investigates national security risks posed by foreign investment in American companies.
The committee reviews deals between US firms and foreign investors and can block sales or force parties to change the terms of a national security agreement. The committee’s powers were significantly expanded in 2018 by an act of Congress called the Foreign Investment Risk Review Modernization Act, known as FIRRMA. In September, President Joe Biden issued an executive order expanding the factors the committee should consider when reviewing deals — such as the deal’s impact on the U.S. supply chain or risks to Americans’ sensitive personal information.
SELL, CONNECT OR ORACLE?
Defying CFIUS sell orders could ultimately mean doing business with the company against the law. That would suck out its business operations like banking, payroll, advertising, and app store services.
But the company said it is already alleviating national security concerns with a $1.5 billion mitigation plan called Project Texas, which would route all US user data to servers owned and managed by US software giant Oracle.
“Once this process is complete, all US protected data will be under the protection of US law and under the control of the US-led security team. Under this structure, there is no way for the Chinese government to access it or force access to it,” Chew said.
Although CFIUS can accept such mitigation agreements, it’s not clear whether the committee will accept TikTok’s proposed alternative, said Anupam Chander, a professor of technology law at Georgetown University. If CFIUS rejects TikTok’s preferred solution, Chander said the federal agency should be required to explain why it believes this plan is inadequate, as it amounts to a huge restructuring of the company.
“TikTok suggests many well-paid outside auditors who would do this kind of routine monitoring,” Chander said. “This is an expensive offer for TikTok, but there’s no way I would treat it as window dressing.”
Though Chew also insisted last week that the company wasn’t interested in selling, TikTok has already considered it. TikTok had pushed negotiations with Microsoft after the company was sidelined by the Trump administration in 2020 and faced either an outright ban or CFIUS’ divestiture order. Microsoft said TikTok ultimately turned down their offer, and while TikTok later said it would sell to Oracle and Walmart, it doesn’t appear Project Texas will amount to a sale, Chander said.
Should TikTok agree to a sale in the future, not only would CFIUS have to approve that transaction, but the Chinese government — which has said it won’t support a forced divestiture — could step in.
WHAT’S NEXT?
Leaders in the US, European Union, Canada, New Zealand, Norway and Taiwan have also banned TikTok on government-issued devices, and at least two countries have banned TikTok outright.
The Afghan Taliban leadership banned it last year on the grounds of protecting young people from “deception,” while India banned TikTok and dozens of other Chinese apps nationwide in 2020 over privacy and security concerns. The ban came shortly after a clash between Indian and Chinese troops at a disputed Himalayan border that left 20 Indian soldiers dead and dozens wounded.
Historically, CFIUS has focused on things like shipping and manufacturing when reviewing transactions for national security concerns, but it signaled a greater interest in popular social media when it ordered dating app Grindr to divest in 2019, Chander said.
The CFIUS function was also in the spotlight last year after billionaire Elon Musk bought Twitter, throwing the microblogging platform into chaos. Yellen vacillated on whether CFIUS would or could review this sale given Musk’s investments in China as well as significant Saudi interest.
Source : www.washingtontimes.com