Who governs TikTok? Is the web secure for social media? Has the U.S. prohibition been averted for good? Over the weekend, President Donald Trump’s attempts to force a rapid sale of the famous Chinese-owned video app TikTok created a preliminary deal that would see Oracle (ORCL) and Walmart (WMT) taking a minority interest in a new U.S. business that would run TikTok.
The U.S. Department of Commerce moved back by a week, to the end of the day on September 27, a threatened ban on American downloads of the app. But crucial questions about data protection, national interest, and the agreement’s nature remain unanswered as the businesses rush to finalize the proposal. What is clear is that the battle over TikTok is bigger than who owns an app that is popular with Generation Z. It is also about the future of US-China relations. The rugged new terrain corporations are forced to negotiate as tensions between the world’s biggest economies is getting worse every day.
For weeks, Trump has threatened to ban TikTok, operated by China’s ByteDance, on the grounds of national security unless an American company takes charge of its operations in the USA. TikTok has around 100 million users in the U.S., and Trump says that it gives Beijing access to American personal data. TikTok refuted those claims. The company has said that its data centers are located completely outside China and that none of that information is subject to Chinese law.
Trump gave his blessing over the weekend to a deal that would give Oracle and Walmart a joint 20 per cent stake in a new company called TikTok Global, based in the United States and running the app. Americans will be four of the company’s five board members, Oracle and Walmart, said in a joint statement. According to a person familiar with the contract, the fifth individual is likely to be ByteDance and TikTok creator Zhang Yiming. ByteDance reported in a statement that the board of TikTok Global includes ByteDance ‘s founder and the Walmart CEO.
Trump said that speaking to reporters over the weekend, he accepted the contract in principle. I gave my blessing to the contract, Trump told me. That is better if they get it done. If they don’t, that is all right, too. But the deal stops just short of the complete sale of TikTok originally requested by Trump, and its structure contradicts his assertion on Saturday that Walmart and Oracle will total control the software. After the contract, with Oracle and ByteDance issuing conflicting statements on Monday, there also seems to be a lot of doubt about TikTok’s proposed ownership structure.
Ken Glueck, Oracle executive vice president, said ByteDance would not own any aspect of the viral video app. Americans will be the majority, and TikTok Global will have no possession of ByteDance, Glueck said. Oracle’s announcement seemed to muddy an already complicated situation after that. Walmart announced on Saturday that under the new agreement, they would take a 20 per cent share of TikTok. The initial announcement indicated that ByteDance would continue to own the remaining 80% of TikTok in the future, raising questions about how this could address the Trump administration’s national security issues about TikTok’s ownership of Chinese interests.
ByteDance reported in a statement Monday that Bytedance will be a 100 per cent owned subsidiary of TikTok. Still, a person familiar with the deal said it was inaccurate. On Monday, Trump suggested that Walmart and Oracle will hold the controlling interest. If we notice that they do not have absolute control, then we would not support the offer. TikTok Global will be partially owned by ByteDance ‘s foreign and Chinese investors, according to the person familiar with the transaction. Still, ByteDance itself will own zero per cent of the new company. The investment from Oracle and Walmart will take TikTokGlobal’s U.S. ownership to 53 per cent, with Chinese and foreign investors from ByteDance holding 36 per cent and 11 per cent, respectively.
The individual also said that Oracle would be responsible for testing the app’s source code and algorithm before passing it on to users. Oracle will store TikTok’s files, including usernames and passwords, within the United States. Oracle said it would host on its cloud platform details relating to American users. ByteDance said in a statement that Oracle would be able to inspect the source code of the app. Still, its algorithms and technology are not transferred in the contract. A Republican senator, Marco Rubio, said there could still be a chance of U.S. user data being sent to China.
If, as I understand they will in this contract, China continues to monitor the code, they could put in that code to secretly send back data to China, to the mainland. No matter where the actual data is stored, anything that sends it the other way can be encoded in that code, he said during a Fox News interview. Trump placed himself as the kingmaker of any TikTok contract, making clear that before anything is made official, he must agree to the terms. If it sounds odd to do so, that’s because it is. Although governments frequently inspect pending transactions to safeguard customers from monopoly control and consider national security when a merger is announced, Trump’s deep involvement is a dramatic departure from how deals are usually negotiated, as is his attempt to force a sale in the first place.
In the United States, the battle for control of TikTok goes beyond social media, security issues, and who ends up in charge. The result would also have significant geopolitical implications, as the United States and China under Trump are moving further apart. The emphasis for a while was on trade and the security of intellectual property, with both sides placing tariffs on hundreds of billions of dollars in commodities while government officials were seeking to negotiate new terms of engagement. But critical technology has also become a major field of contention over the past two years.
TikTok’s tens of millions of U.S. users fear that they will lose access to one of their favorite items as the situation continues to develop. People who already had TikTok on their phones could still post short videos of dances, fun recipes, and comedy routines as usual, under the terms of the threatened ban, but no new downloads would be allowed. U.S. users will also not be able to access security patches or other changes that could cause potential outages or failures.