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TikTok, popular among teens, lets users add music and effects to short videos.
Angela Lang/CNET
This story is part of Generation China, CNET’s series exploring the nation’s technological ambition.
TikTok’s future in the US is up in the air.
The Chinese government may prefer to see the short-form video app shutter its US operations rather than have parent company ByteDance forced to sell them to an American company, according to a Reuters report on Friday. Selling TikTok’s US business because of pressure from the Trump administration could make China, as well as ByteDance appear weak, Reuters said, citing three people with direct knowledge of the matter.
The Chinese embassy in the US pointed CNET to comments made Friday by Zhao Lijian, a spokesman for China’s Ministry of Foreign Affairs, about TikTok. “China opposes the unjustified suppression and targeting of these non-US companies by abusing their state power under the weakest pretext of national security,” he said.
A deal to sell TikTok’s US business, which is being prompted by two executive orders issued by President Donald Trump, had already hit a roadblock because of new Chinese export regulations that cover artificial intelligenceand may include TikTok’s algorithm. The algorithm delivers the videos users see and plays a large role in the app’s popularity so potential buyers are rethinking their bids, The Wall Street Journal reported.
The uncertainty over the algorithm could complicate any sale of TikTok. Microsoft and Walmart have teamed up for a potential deal, while Oracle and “a third US company” have made bids on TikTok, according to CNBC. The financial network reported at the time that TikTok’s US, Canadian, Australian and New Zealand businesses could be worth as much as $30 billion. It’s unclear how significantly the Chinese regulations would affect the valuation.
The new developments come as TikTok takes the US government to court over Trump’s actions, which would effectively ban the app if its ownership doesn’t change. The lawsuit follows more than a month of threats from the Trump administration.
An Aug. 6 executive order bars American companies from doing business with ByteDance or its subsidiaries, and would effectively ban TikTok on Sept. 20. Following a US government panel’s recommendation, Trump issued an Aug. 14 executive order that sets a Nov. 12 deadline for a sale of TikTok. The second order also directed ByteDance to delete any data obtained from US TikTok users.
TikTok’s lawsuit alleges the US government didn’t allow it to respond to the national security concerns cited as the reason for the potential ban. The company has repeatedly said it doesn’t share user data with the Chinese government, one of the main concerns brought up by the Trump administration. In the lawsuit, TikTok noted that outside experts have expressed doubts the government is truly acting out of concerns over access to user data.
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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 a 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 established an information hub to combat misinformation and rumors about its social media platform in real time.
TikTok employees are separately suing on the grounds the order would deprive them of their livelihoods. The employees have signed up prominent internet lawyer Mike Godwin to represent them. The Justice Department says the claim isn’t sufficient to stop the government’s action.
TikTok’s data collection “potentially allow[s] China to track the locations of federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage.”
Executive order on TikTok
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. (Softbank Group, a Japanese stakeholder in TikTok parent company ByteDance, is leading negotiations to buy the short-video app’s assets in that country, according to a report from Bloomberg.)
Here’s what you need to know about the political backlash against TikTok.
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Why the US might try to ban TikTok
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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 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 Chinese 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 they’ve done so, according to The New York Times. The Wall Street Journal found that the TikTok app for Android surreptitiously 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, then-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. (Mayer has since stepped down.)
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 far-flung people who create videos on the app 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 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. Walmart has come on as a partner in that effort, saying in a statement that TikTok could help it “reach and serve [different types of] customers as well as grow our third-party marketplace and advertising businesses.”
Other companies, including Oracle, are also reportedly interested. 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. Apple and Twitter also were reportedly interested.
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.
Will Trump’s actions take away TikTok?
The government could require Apple and Google to pull TikTok from their app stores if a sale doesn’t happen. 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.”
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