UPDATED 20:50 EST / MARCH 15 2023

POLICY

Government reportedly gives TikTok an ultimatum: Sell US business or be banned

Rarely does history repeat itself so quickly, but a report today suggesting that the Biden administration has demanded that ByteDance Ltd. sell their stake in TikTok or face being banned in the U.S. comes just two years after the Trump administration tried to do nearly the same thing.

The Wall Street Journal reported today that the decision by the administration represents a significant shift in policy following ongoing concerns about a perceived security threat from TikTok because of ByteDance’s links to the Chinese government. The demand is said to have been made recently by the Committee on Foreign Investment in the U.S.

Although known for its Chinese links, ByteDance is a publicly listed company with 60% of shares said to be held by global investors. The remaining shares in the company are split between employees and the company’s founders, though the founders have additional voting rights.

In response to the report, TikTok said that a forced sale would not address the perceived security risks. The company pointed to its $1.5 billion proposal from January to increase transparency.

The proposal included a plan to reorganize the company’s U.S. operations, including an independent, third-party monitor that would review code related to how TikTok selects which videos to serve users and how it identifies which videos to delete.

“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, ” a TikTok spokesperson said in a statement. “The best way to address concerns about national security is with the transparent, U.S.-based protection of U.S. user data and systems, with robust third-party monitoring, vetting and verification, which we are already implementing.”

The Biden administration was first reported to be pushing for a sale of TikTok in December. The same arguments used by the administration were made by the Trump administration in 2020 but were derided as xenophobic, with the concerns about national security being dismissed. The only difference today is who sits in the White House.

“As painful as it is for me to say, if Donald Trump was right and we could’ve taken action then, that’d have been a heck of a lot easier than trying to take action in November of 2022,” Sen. Mark Warner, chair of the Senate Intelligence Committee, said in an interview last year.

If the Biden administration does force ByteDance to sell, there are several potential suitors. Before the Trump era plans were shelved, companies that took an interest in buying TikTok included Microsoft Corp. and Twitter Inc. Before the divestment was halted, Oracle Corp. and Walmart Inc. had agreed to a partnership to take over TikTok in the U.S.

Photo: Unsplash

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