Trump issues new order to force TikTok sale: What you need to know – CNET [CNET]

This story is part of Generation China, CNET’s series exploring the nation’s technological ambition.

President Donald Trump issued a new executive order regarding TikTok that extends the time its parent company has to sell the US operations of the popular short-video app, after a government panel recommended the action.

Issued late on Aug. 14, the new order gives ByteDance, the Chinese parent, 90 days to conclude a deal to divest the US arm. It also orders ByteDance to delete any data obtained from US TikTok users.

The new order doubles the amount of time TikTok initially had been given to find a US buyer after an executive order last week raised the prospect the app would be banned next month. The initial order bars “transactions” with ByteDance, a move that could potentially affect Google’s Play Store and Apple’s App Store, which distribute the software in the US. (A similar order targets WeChat, a messaging app owned by Chinese giant Tencent.) Trump issued the earlier TikTok order under the International Emergency Economic Powers Act, a law that allows the president to regulate international commerce after declaring a national emergency.

“The spread in the United States of mobile applications developed and owned by companies in the People’s Republic of China continues to threaten the national security, foreign policy, and economy of the United States,” the initial executive order reads. “At this time, action must be taken to address the threat posed by one mobile application in particular, TikTok.”

Trump’s moves come after weeks of high drama involving TikTok. The president has had TikTok in his sights since early July, when he said he would take action against the company in response to China’s handling of the coronavirus pandemic. US Secretary of State Mike Pompeo said earlier that Trump was considering the ban because the app could make US user data accessible to the Chinese government. The administration’s focus then turned to forcing a sale of the app to a US company, and Microsoft entered into discussions with ByteDance to purchase part of the business. (Microsoft declined to comment on the executive order.)

TikTok quickly followed up by establishing an information hub to combat misinformation and rumors about its social media platform in real time. TikTok said Monday it will use the hub to “shine a light on the facts and set the record straight.”

The company had previously blasted the threatened ban, saying it had tried to engage with the government in good faith for nearly a year. TikTok said, however, that the administration “paid no attention to facts, dictated terms of an agreement without going through standard legal processes, and tried to insert itself into negotiations between private businesses.”

ByteDance says it remains committed to keeping a TikTok presence in the US. 

“TikTok is loved by 100 million Americans because it is a home for entertainment, self-expression, and connection,” a company spokeswoman said after the second executive order. “We’re committed to continuing to bring joy to families and meaningful careers to those who create on our platform for many years to come.”

TikTok is preparing a lawsuit to challenge the original executive order, NPR reported on Aug. 8. The lawsuit will argue that Trump’s action is unconstitutional because it didn’t give TikTok the opportunity to respond, NPR said. On Aug. 22, TikTok confirmed that it’s taking legal action.

Separately, TikTok employees are raising funds for a possible lawsuit to challenge the order on the grounds it would deprive them of their livelihoods. The employees have signed up prominent internet lawyer Mike Godwin to represent them. 

Rising concerns about TikTok’s ability to access the personal data of US users come as TikTok sees its popularity explode. The app has gotten a new boost from the COVID-19 pandemic, drawing in people looking to escape the boredom of lockdown. It’s been downloaded more than 2 billion times, according to research firm Sensor Tower, with 623 million downloads during the first half of this year. India had been its largest market, followed by Brazil and the US.

The US isn’t alone in worrying about the app. India has already banned TikTok, and Australia is also considering blocking it. Trump cited the India ban in his executive order.

In a move that could smooth things over with some lawmakers, TikTok said on July 22 that it plans to hire 10,000 people in the US over the next three years. The company said it would add roles in engineering, sales, content moderation and customer service in California, New York, Texas, Florida and Tennessee. TikTok has also said that it’s setting up a new data center in Europe and will invest 420 million euros ($500 million) in Ireland.

Here’s what you need to know about the political backlash against TikTok.

Why is the Trump administration worried about TikTok?

TikTok has drawn the attention of the Trump administration, as well as other parts of the government, because of concerns it scoops up information on Americans that could be turned over to the Chinese government. The US Army and Navy have banned service members from downloading the app to government-issued phones. Both the US House of Representatives and the Senate have voted to prohibit the use of TikTok on all government-issued phones. Two senators have also requested that the Department of Justice open an investigation of TikTok, as well as videoconferencing app Zoom. 

The concern stems in part from the perceived inability of Chinese companies to reject requests from China’s ruling Communist Party to access user data. China critics often cite a 2017 law that requires its companies and citizens to comply with all matters of national security. TikTok says all US user data is stored in the US, with a backup in Singapore. TikTok also says none of its data is subject to Chinese law. 

The statements didn’t satisfy the Trump administration.

“TikTok automatically captures vast swaths of information from its users, including internet and other network activity information such as location data and browsing and search histories,” the president’s initial executive order reads. “This data collection threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information — potentially allowing China to track the locations of Federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage.”

TikTok’s access to US users’ data may well be worth investigating. There’ll always be concerns when apps from foreign companies collect large amounts of user data, said tech policy expert Betsy Cooper, director of the Aspen Policy Hub.

But, she added, “it’s unclear how much effort the administration will put into actually investigating the seriousness of the specific security concerns with the app versus using this as a threat for broader geopolitical leverage.” 

Intelligence agencies have determined Chinese authorities could collect data through TikTok, but there is no evidence that they have done so, according to The New York Times. The Wall Street Journal found that the TikTok app for Android surreptiously collected device identifiers known as MAC addresses, though the practice ended in November. (TikTok told The Journal that it’s committed to the privacy and safety of its users.)

What has TikTok done to address those concerns?

The company’s blog post following the initial executive order spells out TikTok’s objections. 

“We have made clear that TikTok has never shared user data with the Chinese government, nor censored content at its request. In fact, we make our moderation guidelines and algorithm source code available in our Transparency Center, which is a level of accountability no peer company has committed to,” TikTok said. “We even expressed our willingness to pursue a full sale of the US business to an American company.”

TikTok has emphasized its ties to the US and its independence from China. On July 29, TikTok CEO Kevin Mayer, an American, promised more transparency around how the app works, including making its algorithm available to experts. He called on other companies to do the same thing.

Following comments by Trump on July 31 about a TikTok ban, the company proposed selling the US operations to an American company. That would put the data of TikTok’s US users in the hands of a domestic company. 

Still, the app’s far-flung creators are clearly nervous about its future. Many are encouraging their followers to migrate with them to other platforms, such as YouTube and Facebook-owned Instagram. Instagram recently launched a new feature, called Reels, designed to compete with TikTok and attract creators. (TikTok hilariously trolled Instagram with a well-timed tweet on the day of the launch.)

Can the US make ByteDance sell its US operations?

A government panel called the Committee on Foreign Investment in the United States reviews investments by foreign companies in the US for national security risks. If it sees a red flag, the president can block the deal or ask for changes to it.

The CFIUS panel was investigating TikTok because ByteDance got its foothold in the US by purchasing Musical.ly in 2017 for $800 million. That business was subsequently rebranded as TikTok and became the sensation that swept up US teens. The CFIUS investigation of TikTok was first reported in November 2019.

“Today the President issued an order prohibiting the transaction that resulted in the acquisition of Musical.ly, now known as TikTok, by the Chinese company ByteDance,” Treasury Secretary Steve Mnuchin, who chairs the panel, said in a statement after the second executive order. “The order directs ByteDance to divest all interests and rights in any assets or property used to enable or support the operation of TikTok in the United States, and any data obtained or derived from TikTok or Musical.ly users in the United States.”    

There’s recent precedent for Chinese companies selling off sections of their businesses. In March, Chinese company Kunlun agreed to sell its controlling stake in gay dating app Grindr after the committee raised national security concerns.

(If you’re super interested in CFIUS, the law firm Latham & Watkins has a detailed guide available here.)

What’s the status of a sale of TikTok?

The situation has changed almost as quickly as videos scroll on the app. Microsoft has acknowledged that it’s pursuing a deal for TikTok’s operations in the US, Australia, Canada and New Zealand. The deal, however, might be larger, according to The Financial Times, which reported the software giant might also be interested in purchasing all of TikTok’s global operations. (TikTok isn’t available in China, where a sister app is used.) A deal could be worth between $10 billion and $30 billion, according to CNBC. The large price range may reflect the different proposed deal structures.

The initial executive order left open the prospect of Microsoft reaching an agreement, since it didn’t go into effect until September. The follow-on order doubled the amount of time until the deadline for a sale. The president has suggested the US should receive a portion of the transaction price if a deal is struck. It’s unclear whether the government has the authority to request such a payment. 

Other companies, including Apple, Twitter and Oracle, are also reportedly interested, though it’s unclear how seriously they might pursue a deal. Alphabet, Google’s parent company, has also considered purchasing a small stake in TikTok as part of a group bid but that effort has “fizzled,” Bloomberg reported. Alphabet hasn’t ruled out any future bids for the video app. 

Will Trump’s actions take away TikTok? 

The government could require Apple and Google to pull TikTok from their app stores. But the companies would likely put up a fight. (Apple and Google didn’t respond to requests for comment on the initial executive order.)

“The tech community will be very hesitant to go along with this app ban,” said Wayne Lam, an independent technology analyst. “It sets a precedent for the government to ban other apps or even for other global apps to be inaccessible to the US market.”

Even if the app does disappear from app stores, users can install apps on Android devices without downloading them from the Google Play Store, said Carolina Milanesi, a tech analyst at Creative Strategies. 

“I don’t know at that point how you police that,” Milanesi said.

The government also can’t make a specific app illegal for everyday folks to use, said Kurt Opsahl, general counsel at the Electronic Frontier Foundation, an advocacy group.

“There is no law that would authorize the federal government to ban ordinary Americans from using an app,” he said.

The US can’t keep the app from working on the internet, which some other countries can do, said Arturo Filasto, a co-founder of the Open Observatory of Network Interference. “There is no central place where you can go to and implement a unified filtering strategy, like there is in places like China and Iran,” Filasto said.

The government could order all ISPs in the country to block the app, but there’s no guarantee that TikTok wouldn’t find a way to get around those blocking efforts, Filasto said.

The US Department of State recently unveiled an initiative dubbed  Clean Network that’s designed to protect individual and corporate privacy. The program includes provisions to remove from US stores any apps that “threaten our privacy, proliferate viruses, and spread propaganda and disinformation.”