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TikTok Sale Shelved "Indefinitely" As Biden Admin Reviews Security

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by Tyler Durden
Wednesday, Feb 10, 2021 - 07:19 AM

A plan to force the sale of TikTok's US operations to a group which includes Walmart and Oracle has been indefinitely shelved, as the Biden administration conducts a broad review of the previous administration's efforts to address national security risks posed by Chinese tech companies, according to the Wall Street Journal.

The deal had been in limbo since last fall after several successful legal challenges to the Trump administration by TikTok's Chinese owner, ByteDance Ltd.

According to 'people familiar with the situation,' discussions between ByteDance and US national security officials have been ongoing, and have centered around data security and ways to prevent the Chinese government from accessing data collected on American users.

No "imminent decision" has been made on how to resolve these issues as the Biden administration reassesses the US stance on potential security risks.

"We plan to develop a comprehensive approach to securing U.S. data that addresses the full range of threats we face," said National Security Council spokeswoman, Emily Horne. "This includes the risk posed by Chinese apps and other software that operate in the U.S. In the coming months, we expect to review specific cases in light of a comprehensive understanding of the risks we face."

Last year, former President Trump ordered a ban on TikTok, forcing its sale to the majority US ownership group which included Oracle and Walmart. Days later, the Committee on Foreign Investments in the US (CFIUS), which must approve all such cross-border business deals which may pose national security risks, formerly ordered ByteDance to divest of US operations.

In November, TikTok asked a federal appeals court in Washington to vacate the CFIUS order, calling it 'arbitrary and capricious,' while the company said it was prepared to address the government's security concerns in other ways.

Separately, several federal court rulings have de-fanged the Trump admin order to shut down TikTok, with the most recent (Dec. 7) concluding that Trump likely overstepped his authority under the International Emergency Powers Act with an executive order.

Talks between the Committee on Foreign Investment in the U.S. and TikTok to resolve the situation have continued, according to the people familiar with the matter, one of whom said possible solutions include use of a trusted third party to manage TikTok’s data, which wouldn’t require an outright sale.

Any deal would likely be different from the one discussed last September, the people said, in part because TikTok no longer faces the threat of an imminent shutdown.

Any sale would also need the approval of Chinese regulators. Beijing last year adopted new restrictions on exporting certain types of social-media algorithms that TikTok uses, further complicating deal talks. -Wall Street Journal

ByteDance, whose backers include General Atlantic and Sequoia Capital, was valued at $180 billion in December, according to PitchBook. Founder Zhang Yiming recently encouraged employees to continue working and 'wait for the geopolitical storm' to pass, according to staffers interviewed by The Journal.

Meanwhile, the Walmart and Oracle could still participate in a potential deal, according to officials familiar with the situation, however much of that depends on where the Biden administration comes down on the situation - which could start coming into focus next week, when a formal government response to TikTok's court challenge against Trump's executive order is due.

Next week, another Trump executive order will go into effect banning US transactions with eight China-linked apps, including Alipay mobile, owned by Chinese billionaire Jack Ma's Ant Group, and WeChat mobile payment app, owned by China's Tencent Holdings.

The Biden administration can choose to enforce Trump's order, or it could extend the deadline, supersede it with a new EO, or simply rescind it.

Trump administration officials had contended that Chinese tech companies such as ByteDance, Huawei Technologies Co. and others pose a national security threat because they can be forced to share their data on Americans with China’s authoritarian government.

The companies have said they would never do so, but Mr. Trump’s concerns have been shared by both Democrats and Republicans in Congress.

The Biden administration’s review is being led by officials who have sometimes been critical of Mr. Trump’s targeting of Chinese tech companies, although they have expressed a range of views on how to respond to the complex challenge. -Wall Street Journal

Biden national security adviser Jake Sullivan and White House China coordinator Kurt Campbell have been publicly critical of Trump's crackdown on Chinese tech companies - with the pair writing in a 2019 article in Foreign Affairs that while protecting US technological advances will require enhanced restrictions on China, "These efforts should be pursued selectively rather than wholesale, imposing curbs on technologies that are critical to national security and human rights and allowing regular trade and investment to continue for those that are not"

Another Biden admin officials who's weighed in on the TikTok issue is Peter Harrell, who currently serves as the senior director at the National Security Council for international economics and competitiveness, who tweeted last Summer: "Strongly agree that the best way for US to address TikTok is for TikTok to become a leader in transparency and data privacy, rather than banning it."

"I take the threat of Chinese surveillance seriously, but it is welcome news that the courts may be beginning to push back on unbounded executive power," he said in another tweet.

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