Biden ramps up pressure on TikTok with latest demand

President Biden’s administration is increasing pressure on popular video-sharing app TikTok, threatening to ban the app if China-based ByteDance doesn’t sell its stake.

The demand, which was confirmed by TikTok late Wednesday, marks the latest escalation of US government pressure on the company. It has drawn increasing criticism from both sides of the aisle for posing a potential security risk due to its ties to China.

TikTok CEO Shou Zi Chew, who is due to testify before a House panel next week, said the divestment would not resolve security concerns and the company has doubled down on its ongoing plans to instead monitor and store US user data separately.

“Divestments don’t solve the problem: A change in ownership would not impose new restrictions on data flow or access,” Chew said in a recent interview with The Wall Street Journal.

Chew declined to comment on whether ByteDance would be willing to sell the app to an American company.

What is the probability of a TikTok sale?

Hannah Kelley, a research associate in the Technology and National Security program at the Center for a New American Security, said she doesn’t think ByteDance will agree to a sale of TikTok.

“This has been the sticking point in CFIUS negotiations for over two years on how to mitigate identified U.S. national security concerns, particularly around data flows and access, close to a full divestment,” Kelley said, referring to the committee on Foreign Investments in the United States.

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“I think Washington has decided that Project Texas or redirecting US user data through Oracle cloud servers will not be enough to address its security concerns, especially as the company has continually struggled to maintain trust in the given US government a constant stream of leaks and reports of data abuse or misuse,” she added.

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However, Cyrus Walker, the founder and CEO of cybersecurity firm Data Defenders, said a sale of the app could happen. But it would depend on whether there is a compromise that the Chinese government would be interested in.

“What is the US willing to give up in exchange for the price of selling the app?” Cyrus said.

Wedbush analysts Dan Ives, Taz Koujalgi, John Katisingris and Steven Wahrhaftig wrote in a research note that they think TikTok’s fork from ByteDance is “very unlikely” and that a sale would be “very complex with likely many caveats on the list.” were .”

Who will benefit from a TikTok ban?

Facebook’s meta logo on a sign at the company’s headquarters on October 28, 2021 in Menlo Park, Calif. (AP Photo/Tony Avelar, File)

Should the print campaign end with TikTok being banned, US tech companies including Meta, the parent company of Facebook and Instagram, and Snapchat would benefit, according to Wedbush analysts.

In recent years, US-based social media companies have rolled out features that mimic TikTok’s typical full-screen vertical video feed. Snapchat introduced a feature called Spotlight that allows users to discover videos in this format, and Instagram did the same through Reels.

Meta, which struggled with a sales slump last year for the first time after an astronomical rise in the last decade, is now more focused on recommended content and video content — a model more in line with TikTok’s discoverability capabilities.

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Shares of Meta rose more than 3 percent on Thursday amid news of the Biden administration’s threat over TikTok.

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The analysts said a ban would also “significantly increase” tensions between the US and China as a “brewing cold tech war is playing out across the software and chip ecosystem” and investors would be watching closely, the analysts said .

“This is all a high-stakes poker game, and the Beltway is clearly putting more pressure on ByteDance to strategically sell this key asset in a big move that could have significant implications,” Wedbush analysts said in a report.

Why is a ban or sale of TikTok being discussed?

Sen. Josh Hawley (R-Mo.)

Senator Josh Hawley (R-Mo.) questions Attorney General Merrick Garland during a Department of Justice hearing of the Senate Judiciary Committee on Wednesday, March 1, 2023. (Annabelle Gordon)

Pressure has been building for years, stretching across two administrations, over how TikTok works in the US.

Under former President Trump, the administration issued executive orders to ban downloads of the app in the US, but they were withdrawn by Biden.

Instead, Biden ordered a CFIUS review of the app in June 2021.

As the government appears to be weighing a course of action, Congress has also tabled proposals aimed at targeting TikTok. Last year, a proposal led by Sen. Josh Hawley (R-Mo.) to ban TikTok on government devices was passed and signed into law as part of a omnibus bill.

Several states have taken similar action, including Texas, Maryland, New Jersey and Ohio.

Read: Senators Introduce Bipartisan Bill to Give President Power to Ban TikTok and Other Technologies

Other proposals to ban TikTok more broadly have also surfaced. A bill more uniquely targeting TikTok, led by House Foreign Affairs Committee Chairman Michael McCaul (R-Texas), exited the committee earlier this month in a 24-16 intraparty vote.

McCaul’s bill faces an unlikely path to passage in a divided Congress without Democratic support.

A bipartisan bill introduced last week by Sens. Mark Warner (D-Va.) and John Thune (RS.D.) known as the RESTRICT Act may fare better. The bipartisan bill doesn’t specifically target TikTok, but would give the federal government more powers to regulate or ultimately ban technology linked to foreign adversaries.

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Alongside China, the proposal calls on the Commerce Department to identify and mitigate risks posed by technologies associated with North Korea, Iran, Russia, Cuba and Venezuela.

The Restrict Act also has support from the White House.

“Aside from developments within the CFIUS process itself, I think bipartisan support for the Restrict Act, which would allow the US government to restrict and even ban foreign technology on the basis of national security, may have helped moving the needle,” Kelley said.

She added that rising tensions between the US and China over recent export control restrictions and Chinese spy balloons may have influenced this decision.

“The existential threat China poses to the United States goes well beyond TikTok and spans the political, economic and military realms,” she said. “I think all of this comes into play when you consider an app that is so closely linked to the PRC [People’s Republic of China].”

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Senate Intelligence Committee Chairman Mark Warner (D-Va.)

Chairman Sen. Mark Warner (D-Va.) at the Senate Intelligence Committee meeting to discuss global threats in Washington, DC on Wednesday, March 8, 2023. (Annabelle Gordon)

What happens if ByteDance sells TikTok

Walker said selling TikTok to an American company would “at least remove the immediate threat of the Chinese government gaining access to American data.”

He added: “If the app were sold out, it would be wise for the new owner to check the app’s code from top to bottom to ensure there are no ‘backdoors’ in the app.”

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