The TikTok Saga: a US-China trade war
After weeks of threats by President Donald Trump, last week the U.S. Department of Commerce announced that, starting Sunday 20th of September, U.S. residents were banned from downloading and transacting through the video-sharing app TikTok. The ban was later called off after software company Oracle showed interest in investing in a new company, TikTok Global, to be headquartered and operated within the U.S..
What are the U.S. government's concerns however? In a statement, the Department said that the banning follows “the president’s direction, (…) to combat China’s malicious collection of American citizens’ personal data”. This comes after the app was accused of collecting “vast swathes of data from users, including network activity, location data, and browsing and search histories”.
The U.S. President’s security concerns stem from the fact that TikTok’s parent company, ByteDance has employees in China, and it is subject to the Chinese jurisdiction. This makes data processing of 100 million U.S. users dependant on Chinese data protection laws, which is seen as a data leakage to foreign power. Another line of concern is whether TikTok employs content-moderation policies and practices which serve the preferences of the Chinese Communist Party. ByteDance has since then rebutted these accusations by stating that data from U.S. users remains in the app’s servers located in America.
It is unclear what statutory authority supports the ban of TikTok, since the relevant U.S. International Emergency Economic Powers Act does not give the President authority to prohibit American access to foreign social media, unless a national emergency is declared. This would have to be declared under "malicious cyber-enabled activities" and would depend on whether data processing could be considered as 'hacking' under the national emergency's framework.
Potential sanctions could include freezing the assets of the entity and thus prohibit all dealings with the foreign entity's interests in those assets. This would force TikTok to operate from foreign locations which would result in a deterioration of maintaining its servers, or any other operations or property within the U.S.. Considering that TikTok depends on user-generated content, the U.S. customer base follows the popularity of its user, the sanctions could force TikTok 'creators' with massive audiences to emigrate from the video-sharing platform, and take their audience with them.
TikTok’s parent company, ByteDance, has consequently been looking since early August to sell the app to a U.S. company and alleviate the concern. The most recent bidder has been Oracle, which does not have plans to buy TikTok but instead invest and hold a 12.5% stake in a new company, TikTok Global, incorporated and headquartered within the U.S.. Walmart will hold another 7.5% stake while the remaining 80% will still be held by ByteDance.
Reportedly, 40% of ByteDance itself is held by U.S. venture-capitalists, a fact which some interpret as translating to a future 53% majority control in TikTok Global. In the eyes of the U.S. government, these ventures will bring the company to the U.S.’ hands and create an approximate 25,000 U.S-based jobs. The potential bidders Oracle and Walmart have since said in a joint statement that TikTok Global will contribute $5 billion in taxes to the Treasury. There have also been reports that the new company plans to launch an IPO before the end of 2021. Others, however, are questioning the integrity of the deal and consider TikTok Global a hybrid corporate creature, over which the Chinese and the Americans will fight for control.
A newly-incorporated TikTok company will have to commit to publishing transparency reports as set out under law enforcement guidelines. In order to ensure that all links to the Chinese government and any indirect transfers of user data are banned, the company will have to adopt a policy which will prohibit user data from being used or monitored by third parties for surveillance or other purposes. TikTok Global will also have to ensure end-to-end encryption within the app, in order to certify that direct messages are fully private.
To find out more on how the Chinese government treats personal data, read our previous post on how it constructs a system of mass surveillance here.