US Threatens To Ban TikTok Ban If Chinese Owners Don't Sell; Meta, Snapchat Jump
In its most aggressive assault yet on addictive Chinese video-sharing sensation TikTok, the Biden administration is demanding that its Chinese owners sell their stakes or face a U.S. ban of the app, the WSJ reported citing people familiar with the matter. The Committee on Foreign Investment in the US, or Cfius — a multiagency federal task force that oversees national security risks in cross-border investments and which gained prominence under the Trump admin — made the sale demand recently.
The move represents a major shift in policy on the part of the administration, which has been under fire from Republicans who say it hasn’t taken a tough enough stance to address the perceived security threat from TikTok, owned by Beijing-based ByteDance.
TikTok executives have said that 60% of ByteDance shares are owned by global investors, 20% by employees and 20% 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.
In response to the US demand, TikTok said Wednesday that a forced sale wouldn’t address the perceived security risk. Instead, it has pledged to spend $1.5 billion on a program to safeguard U.S. 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 in a statement. True, but it wouldn't hurt either.
“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,” Oberwetter said.
However, critics have said that plan isn’t sufficient, saying any Chinese-owned company must comply with demands from Beijing if called upon.
Accprding to the WSJ, it wasn’t immediately clear what the next step by the U.S. 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 Energy and Commerce Committee next week to address lawmakers’ questions on the security issues.
While the Trump administration sought to force a sale of TikTok to U.S.-majority ownership, based on similar national security concerns, it ultimately failed when ByteDance went to court to block a proposed federal ban, arguing 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
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.
News of the proposed ban boosted stocks of TikTok competitors Meta and Snapchat, the latter rising 10%, while the former gained as much as 3%.
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