The Committee on Foreign Investment in the United States (CFIUS) has instructed the Chinese tech giant ByteDance to divest its TikTok US market share to protect consumer data and national security or face a potential ban.
ByteDance has been in negotiations with the US Government for over two years, trying to convince Washington that the short-form video application does not pose a national security risk, but that has not worked in its favor.
The CFIUS, an agency led by the Treasury Department that evaluates cross-border deals, has jurisdiction to recommend a divestiture because ByteDance acquired Musical.ly, a company that had a significant US consumer share that later merged with TikTok in 2017.
TikTok has been under scrutiny by the US government from the time when former President Donald Trump made two executive orders against the mobile application. One banned TikTok from the US but was quickly overturned by a federal judge and revoked by President Joe Biden. The other required ByteDance to divest its US assets and delete all US user data.
A TikTok spokesperson told Nikkei Asia, “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.”
Caitlin Chin, a fellow at the Center for Strategic and International Studies (CSIS), said that very few companies are large and wealthy enough to purchase TikTok, and even if a company like Meta or YouTube was interested, an increasing market consolidation would raise antitrust concerns.
However, TikTok has said that it is now working on a program called Project Texas. This is to bolster data security for US-based users, including moving all US consumer data to the Oracle Cloud system.
ByteDance is also working on a possible solution to avoid a sale, said a person close to the situation.
ByteDance is a Chinese internet company that is based in Beijing but incorporated in the Cayman Islands. The company owns various famous mobile applications like TikTok and Douyin (TikTok’s Chinese counterpart).
