The Washington Post

Biden administra­tion wants Tiktok’s Chinese owners to divest from app


The Biden administra­tion is pushing a plan that would require Tiktok’s Chinese owners to divest from the popular video app, in an escalation of its efforts to address national security concerns about the company’s Beijing-headquarte­red owner Bytedance.

The Committee on Foreign Investment in the United States in recent days approached Tiktok with a series of tougher options, including divestitur­e, according to a person familiar with the deliberati­ons, who like others interviewe­d spoke on the condition of anonymity to discuss sensitive matters.

Tiktok has been in negotiatio­ns with CFIUS for over two years. As the app has surged in popularity during that time, so have policymake­rs’ worries that it could be exploited to expose Americans’ sensitive data or spread propaganda.

Tiktok’s political problems are mounting in Washington a week before company CEO Shou Zi Chew is set to testify on Capitol Hill. Chew is expected to be a political punching bag as lawmakers from both parties sound the alarm about the perceived security risks presented by the app and increasing­ly call for a Tiktok ban.

A week ago, the White House endorsed a bipartisan bill that would grant the Commerce Department broad authoritie­s to ban or limit Tiktok and other technology apps rooted in foreign countries. However, efforts to ban an app used by more than 100 million people in the United States could also run afoul of the First Amendment.

Tiktok confirmed it was in communicat­ion with CFIUS, but there was not yet a clear recommenda­tion for what a divestitur­e of the app’s Chinese owners would look like in practice.

“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,” said Brooke Oberwetter, a Tiktok spokespers­on. “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 the company was disappoint­ed with CFIUS’S direction following more than two years of efforts to develop a plan to restructur­e the company’s handling of Americans’ data. The company also has owners who are not Chinese, so it remains unclear how a divestitur­e order would technicall­y work, she said.

The White House National Security Council and the Treasury Department declined to comment. CFIUS officials did not respond to requests for comment. The Wall Street Journal first reported on CFIUS’S proposal.

Eric Sayers, a nonresiden­t fellow at the American Enterprise Institute, said the government has effectivel­y created two options for Tiktok: Either divest or face the bipartisan legislatio­n, called the Restrictin­g the Emergence of Security Threats that Risk Informatio­n and Communicat­ions Technology Act. Both could lead to the same result of forcing Chinese stakeholde­rs to sell off their shares in the company.

“This signals to reluctant Republican­s on the Hill that the government is serious about divestitur­e and makes the chances

RESTRICT passes quickly even higher,” Sayers said.

Two people with knowledge of the discussion­s said the Justice Department had been resistant to any option short of a forced sale. Deputy Attorney General Lisa Monaco said in a statement last week after the announceme­nt of the RESTRICT Act that the United States faces “systemic threats from a range of technology products and services sourced from foreign adversarie­s.”

The stance effectivel­y kills TikTok’s chances of winning approval for Project Texas, the $1.5 billion restructur­ing proposal it has spent years crafting in hopes of assuaging U.S. national security concerns. The plan would have subjected Tiktok to closer government oversight than any U.S. social media company has ever faced, including measures for third-party protection and review of the app’s data and code.

Under the deal, Tiktok’s U.S. operations would have been consolidat­ed into a subsidiary overseen by a Cfius-approved board of directors, though Bytedance would have remained the ultimate owner. Tiktok officials said they proposed the final deal to CFIUS in August. Justice and

Treasury Department officials were unconvince­d it would be enough, according to two people familiar with the negotiatio­ns.

Oberwetter said the company is continuing to move forward with its security initiative­s, including Project Texas. The company also announced another data security project for Europe, dubbed Project Clover.

The government’s stance comes three years after the Trump administra­tion pushed to ban the app or sell itself to an American company, with the U.S. Treasury collecting a “very substantia­l” share of the proceeds. The Chinese government responded that year by adding recommenda­tion algorithms like those used by TikTok to its export-control list, effectivel­y banning the sale.

A divestitur­e order probably would require Chinese officials’ approval, and the government in Beijing has given no indication that its stance has changed toward what it has criticized as U.S. corporate bullying.

An attempt at forced divestitur­e also probably would face legal action from Bytedance, which was founded by Chinese entreprene­urs and says it is not owned or controlled by any government entity. About 60 percent of ByteDance’s shares are owned by institutio­nal investors, including the American investment giants Blackrock, General Atlantic and Sequoia. Company employees, including thousands in the United States, own 20 percent. The remaining 20 percent is owned by Bytedance’s founders, although they retain a larger voting stake.

The Trump administra­tion’s ban attempt collapsed in court after federal judges ruled that the government had not given evidence of Tiktok’s harm and that such a move could violate Americans’ free-speech rights.

Bytedance and Tiktok officials have in recent months begun offering briefings to lawmakers, researcher­s and journalist­s on the Project Texas efforts. Bytedance officials in China have increasing­ly called on the company to speak more proactivel­y in defense of itself after months in which they had hoped the CFIUS process would conclude with Project Texas’s approval, according to two people familiar with their strategy.

Chew has also in recent weeks conducted private meetings with lawmakers to argue in the company’s defense.

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