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Friday, Sep 18, 2020

Trump says TikTok will be shut out of US unless sold by September 15

Trump says TikTok will be shut out of US unless sold by September 15

In addition to Microsoft, at least two other interested buyers in the tech industry are in talks with ByteDance to acquire the video-sharing app, source says.

US President Donald Trump said on Monday that he was not opposed to Microsoft acquiring TikTok but vowed that the popular video-sharing app, which is owned by Chinese tech giant ByteDance, would be “out of business” in the United States if it is not sold by September 15.

It was the latest in a shifting series of sometimes contradictory statements Trump and his advisers have made in recent days about how to rein in TikTok, which the administration and others in Washington view as a national security threat.

The US has been reviewing the company for months, saying it could be forced to hand over millions of Americans’ user data to the Chinese government, an accusation the company has denied.

Earlier on Monday, White House trade adviser Peter Navarro said on CNN that Microsoft was “clearly a multinational company that's made billions in China … that enables Chinese censorship through things like Bing and Skype”.




Talks for ByteDance to sell TikTok’s US operations have heated up since June, when it became clear that to be able to do business in the US, TikTok would need to sever ties to its Chinese owner. The US Congress has moved forward with a bill that would prohibit federal employees from using the app on government-issued gadgets.

In addition to Microsoft, there are at least two other interested buyers in talks with ByteDance, both of which are in the tech industry, said a person with knowledge of the matter.

Microsoft started its discussions in mid-July to buy TikTok, which is valued at US$50 billion, according to the person, who asked not to be named because the discussions are private. The deal, which is an offer to buy TikTok’s US, Canada, Australia and New Zealand operations, would result in a lower valuation, said the person.

The talks between the Microsoft and ByteDance are moving forward without significant sticking points, but it will take time to agree on terms for all parties, said the person.

TikTok’s current equity investors, General Atlantic and Sequoia, have made a bid but the discussions did not advance, said the person. Private equity firms could join the bids by the strategic buyers by rolling over their stakes or sell some interests but remain owners, the person said.

“TikTok will be here for many years to come,” the company said in a statement on Monday.

TikTok was formed in 2018 through a US$1 billion takeover of Musical.ly by ByteDance. The app, which allows users to share 15-second home-made videos, has become hugely successful, particularly because of its popularity among US teenagers.




Since then, the relationship between Washington and Beijing has deteriorated. The tension has increasingly focused on the rivalry centred on future technologies as a number of Chinese tech firms have grown to become leaders in key areas such as 5G and artificial intelligence.

The US has added China’s tech giant Huawei Technologies, now the world’s largest smartphone maker and a 5G tech leader, to a so-called entity list to bar it from doing business with its American counterparts. More than 80 Chinese companies and their affiliates have since been added to the list.

The Trump administration has also blocked merger deals to prevent advanced US technologies from being sold to Chinese buyers. Since 2018, the administration has prohibited Ant Group’s US$1.2 billion proposal to buy MoneyGram and a US$117 billion attempt by Broadcom to acquire Qualcomm.

Grindr, a California-based gay dating app, was sold to a group of US investors in June after a Treasury led government body, the Committee for Foreign Investment in the US (CFIUS), forced a fire sale by its Chinese owner, Beijing Kunlun Tech, citing national security concerns.

The same committee has been reviewing ByteDance’s Musical.ly transaction since last year.

Another avenue for the government to ban TikTok would be the International Emergency Economic Powers Act (IEEPA), a 1977 law that gives the president broad authority to impose economic sanctions.

Trump would have to declare a national emergency to invoke the law, but analysts say its text is broad enough that it might apply to international transactions related to TikTok.

“If indeed the US government has been successful in forcing the leading global Chinese social media app to divest its US operations, this sets a potentially dangerous precedent,” said Paul Triolo, head of global tech policy at Eurasia Group.

“The US is basically saying, any company with a China connection cannot operate in the US if it retains ties to its China-based parent because of data privacy, censorship, or potential use to influence the US political process.”

So far, China has yet to respond. But there are signs that Beijing is directing TikTok’s recent moves.

On Monday, TikTok said it was contemplating moving its headquarters to London from California, according to a ByteDance representative.

But it is not a given that the administration pressure tactics will succeed, an analyst said.

“ByteDance isn’t without leverage. They are betting that the US can’t really ban TikTok,” said James Lewis, director of technology policy at the Centre for Strategic and International Studies.

“They can tell government employees not to use it. But the US has the First Amendment,” Lewis added, referring to the constitutional provision that prevents the government from making laws to regulate freedom of speech. “The government can’t just ban a website. We are not China.”

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