This story is part of Generation China, CNET's series exploring the nation's technological ambitions.
The future of TikTok in the US is in the air.
A deal to sell the US short-form video app business has hit a roadblock as it's unclear whether new Chinese regulations for the export of artificial intelligence extends to TikTok's algorithm, the Wall Street Journal reported on Wednesday. Without the algorithm that delivers the videos users watch, and plays a huge role in the app's popularity, potential buyers are rethinking their bids on TikTok, the Journal said.
Due to updated regulations in China, Beijing-based ByteDance, which owns TikTok, may need to obtain a state license prior to selling the technology. An official from the Commerce Department reportedly on Thursday stressed China's power to authorize or block the move Selling some technologies abroad although he said the regulations were not aimed at any particular company.
The uncertainty about the algorithm could make any deal difficult. Microsoft and Walmart have teamed up on a potential deal, while Oracle and "a third US company" have bid on TikTok, according to CNBC. The financial network reported at the time that TikTok's U.S., Canadian, Australian, and New Zealand businesses could be valued at up to $ 30 billion. It is unclear how much Chinese regulations would affect the rating.
The new developments come when TikTok takes the U.S. government to court over an order issued by President Donald Trump that would effectively ban the app if its ownership does not change. The legal action More than a month of threats from the Trump administration and a subsequent order from the executive branch followed.
August 6th supreme command gave TikTok about a month and a half to find a buyer. A week later, Trump extended that period to 90 days in another executive order, following a recommendation from a government body. The second order also instructed ByteDance to delete all data received from US TikTok users.
TikTok's lawsuit alleges the US government did not allow it to respond to the national security concerns cited as the reason for the possible ban. The company has repeatedly stated that it will not share user data with the Chinese government, which is one of the top concerns of the Trump administration. In the lawsuit, TikTok found that outside experts have expressed doubts that the government is really acting out of concerns about access to user data.
The president has targeted TikTok since early July when he said he would take action against the company in response to China's handling of TikTok the coronavirus pandemic. US Secretary of State Mike Pompeo previously said Trump was considering the ban because the app could expose US user data to the Chinese government. Administration then focused on forcing the app to be sold to a US company, and Microsoft entered into discussions with ByteDance to acquire part of the business. (Microsoft declined to comment on the Executive Order.)
Tick tock Established an information center to combat misinformation and rumors through its social media platform in real time.
TikTok employees are suing separately on the grounds that the arrangement would steal their livelihoods. The employees have has signed up a prominent internet lawyer Mike Godwin to represent them.
TikTok's data collection "may be allowed[s] China to track federal employee and contractor locations, prepare dossiers of personal information for extortion, and conduct corporate espionage. "
Executive order at TikTok
There are growing concerns about TikTok's ability to access US users' personal information TikTok sees its popularity skyrocket. The app has received a new boost from the COVID-19 pandemic and is attracting people who want to escape the boredom of lockdown. It has been downloaded more than 2 billion times, with 623 million downloads in the first half of this year, according to research firm Sensor Tower. India was the largest market, followed by Brazil and the USA.
The US is not alone when it comes to the app. India has already banned TikTokand Australia is also considering blocking it. Trump cited the India ban in his executive order. (Softbank Group, a Japanese stakeholder of TikTok parent company ByteDance, is a leader Negotiations to purchase the assets of the short video app in this country, according to a report by Bloomberg.)
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 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 the growth of our third-party market and advertising business. "
Other companies including oracle, are supposedly interested too. Alphabet, Google's parent companyhas also considered buying a small stake in TikTok as part of a group offering, but those efforts have "fizzled out," Bloomberg reported. Alphabet hasn't ruled out future bids for the video app. Apple and Twitter were supposedly interested too.
The president has suggested that the US should receive a portion of the transaction price when a deal is closed. It is unclear whether the government has authority to request such a payment.
Will Trump's Actions Take TikTok Away?
The government could require Apple and Google to pull TikTok out of their app stores if there is no sale. But companies would probably argue. (Apple and Google did not respond to requests for comments on the original Executive Order.)
"The tech community will be very reluctant to agree to this app ban," said Wayne Lam, an independent technology analyst. "It is a precedent for the government to ban other apps, or even other global apps that are inaccessible to the US market."
Even if the app disappears from the app stores, users can install apps on Android devices without having to download them from the Google Play store, said Carolina Milanesi, tech analyst at Creative Strategies.
"I don't know how you are monitoring this at this point," said Milanesi.
Neither can the government prevent any particular app from being illegal for everyday people, said Kurt Opsahl, general counsel at the Electronic Frontier Foundation, an advocacy group.
"There is no law that would authorize the federal government to prohibit ordinary Americans from using an app," he said.
The US can't stop the app from working on the internet, which some other countries can do, said Arturo Filasto, co-founder of the Open Observatory of Network Interference. "There is no central place where you can implement a unified filtering strategy like there is in countries like China and Iran," said Filasto.
The government could order all ISPs in the country to block the app, but there's no guarantee TikTok won't find a way to bypass these blocking efforts, Filasto said.
The US State Department recently launched an initiative called Synchronized Clean network This is supposed to protect the privacy of individuals and companies. The program includes provisions to remove apps from US stores that "threaten our privacy, add viruses, and spread propaganda and disinformation".
