Why Trump can force Chinese owner of TikTok to sell it

On Friday, the Information Age Cold War with China warmed up by a few degrees. The battleground of the day: TikTok, the wacky and hugely popular mobile app.

Gen Z loves TikTok. President Trump threatened to ban it. Secretary of State Michael R. Pompeo call him a threat to national security. And now the White House, according to a Bloomberg report, is preparing an order to force TikToks’ Chinese parent company, ByteDance, to sell it, presumably to a US company.

The Trump administrations’ choice of an app teens use to share comedy sketches and dance moves as its cyber defense foothold, despite the lack of any evidence the app has been used against U.S. interests, is purely 2020, with the president swirling around nagging concerns about national security and corporate espionage in a wider campaign of economic and diplomatic play against a powerful rival.

In early July he said television interviewer Greta Van Susteren that he saw the TikTok ban as a way to retaliate against China’s handling of the coronavirus epidemic.

At a press conference Thursday, with deaths from U.S. coronaviruses exceeding 150,000, Trump said: It’s China’s fault. And that’s how.

The message may be confusing, but it is clear that China is seeking to compromise information systems and collect as much data on Americans as possible, said William J. Holstein, Chinese analyst and tech hawk.

China is entering a global information systems war, said Holstein, author of The New Art of War: China’s Deep Strategy in the United States.

It sounds silly, but I don’t think they’re really interested in the 17-year-old somersaults, Holstein said. They look for information that helps them access systems. Let’s say you work in military high tech and they access your daughter’s phone. They can use this information to try to access your own phone, email, computer.

To date, however, no one has produced evidence that China uses TikTok in this way.

There was never any evidence of guns [that the Chinese government has] manipulated TikTok or stolen user data, said Alec Stapp, director of technology policy at the Progressive Policy Institute. The app requires a lot of user data, but so do US apps.

Still, several government agencies have ordered employees to remove the app from their phones. Application researchers discovered that TikTok was copy data from clipboard in iPhones every few seconds. TikTok had said it was an anti-spam measure and ended the practice after it was posted.

After the president first threatened a ban, TikTok released a statement: TikTok is headed by a U.S. CEO, with hundreds of employees and key executives in safety, security, products and safety. public policy here in the U.S. We have never provided user data to the Chinese government, nor would we if asked.

The company hired former Walt Disney Co. executive Kevin Mayer in May as managing director of TikTok and COO of ByteDance.

In response to Friday’s report of an effort to force a sale, TikTok released another statement: While we don’t comment on rumors or speculation, we are confident in TikTok’s long-term success. Hundreds of millions of people come to TikTok to be entertained and connected, including our community of creators and artists who are building livelihoods from the platform. Have been driven by their passion and creativity, and committed to protecting their privacy and security as we continue to work to bring joy to families and meaningful careers to those who create on our platform.

TikTok isn’t the first tech company caught in the midst of this international power struggle. Although Apple has found a huge market for its iPhones in China, major US internet and app companies have been largely left out. Facebook, Google and Twitter were blocked in 2009; Instagram in 2014; and Reddit in 2018. Millions of users in China, however, are reportedly bypassing these blocks with VPNs.

For years, the White House has lambasted Huawei, China’s leading telecommunications equipment supplier, which tries to install advanced 5G cellular systems in countries around the world. Critics say Huawei could use these networks to spy on data streams. Huawei constantly insists that it has no such intentions.

In March, Beijing Kunlun Tech, then Chinese owner of LGBTQ dating app Grindr, sold a 98% stake in the company to a US private equity firm under pressure from the US government after discovering that engineers from Grindr in Beijing could access data on American users, including their private messages and their HIV status.

If the Trump administration forces ByteDance to sell TikTok, the list of potential buyers is relatively short, with Microsoft leading the way. The Redmond, Washington-based software giant, which paid $ 26 billion to acquire LinkedIn in 2016, would be in talks on what would be another successful acquisition.

Wall Street analyst Dan Ives of Wedbush Securities told The Times that he believes Microsoft is the only company with the means and the desire to buy an app. would have valued by investors in ByteDances at $ 50 billion, close to the combined market value of Twitter and Snap.

Amazon, Facebook, Apple and Google, the other obvious contenders, have their own issues right now: They’re up to their eye level in a regulatory whirlwind, the last thing they’re going to do is buy TikTok, said Ives, with the general managers of all. four companies called to testify at a House of Representatives antitrust hearing on Wednesday.

If they weren’t given such scrutiny, TikTok would make a tempting acquisition target. The app has been downloaded more than 165 million times in the United States, according to app analytics company Sensor Tower, and billions of TikTok videos have been downloaded. As of July 22, it was the most downloaded app in the world and No. 2 in the United States after Zoom (whose ties to China have raised their own security concerns within American companies and entities. government).

According to Sensor Tower, TikTok’s install rate on U.S. devices has not slowed since the Trump administration first raised concerns, suggesting consumers have yet to be put off.

Microsoft did not respond to a request for comment.

There is also a question about Trumps’ ability to force a sale. I don’t see how they could force ByteDance to do something like that, because it’s a Chinese company, Holstein said. Although they can block it from the US market, using the US Foreign Investment Committee as a tool.
The committee is a federal interagency group that reviews foreign investments and other transactions for national security implications.

Justin Sherman, a member of the Cyber ​​Statecraft Initiative at the Atlantic Council, said the Trump administration has still not made it clear why TikTok should undergo a forced sale, with the Foreign Investment Committee continuing to investigate. The argument for Grindr losing its Chinese owners has been made more clearly, Sherman said.

Ironically, a rushed sale to Microsoft or another buyer may be a sign that any national security concerns around TikTok were overblown, Stapp said, noting that the Chinese government would have to sign the deal.

The risk here is that the United States ends up banning TikTok almost permanently and then that asset goes to zero, destroying $ 50 billion, Stapp said. It is a bad economic result.

But if the Chinese government was relying on geopolitical considerations, he said, the owner of TikToks wouldn’t seriously consider selling now.

Times editor-in-chief Wendy Lee contributed to this report.