The Trump administration took another shot at TikTok, telling a judge it has the authority to ban the popular app known for quirky videos of people dancing and lip-syncing.
In a Friday court filing, the US government said the popular Chinese-owned video-sharing app poses a national security threat because of its relationship with the Chinese government. Because of those ties, the government should be allowed to impose restrictions that will make the app unusable in the US next month. The proposed restrictions areto protect US national security, government lawyers said.
“The President should not be prevented from regulating national-security threats simply because a foreign adversary cloaks its activities within a media company,” the 46-page filing said. TikTok didn’t respond to a request for comment, but has said it hasn’t and wouldn’t turn over US user data to the Chinese government.
President Donald Trump signed an executive order in August that bars any US transactions with TikTok’s Chinese parent company, ByteDance, saying the data TikTok collects “threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information.” The data could allow China to track the location of federal employees and contractors, the executive order said. In September, a federal judged granted TikTok’s request for a preliminary injunction against the order.
The proposed deal is still being reviewed and there are still lots of unanswered questions about the relationships that TikTok, Oracle and Walmart will have. There’s also a lot of confusion about what role ByteDance plays in the arrangement.
Here’s what you need to know:
What’s in the deal between TikTok, Oracle and Walmart?
Oracle and Walmart would get a combined 20% stake in a new company called TikTok Global, which is expected to go public in the next year. Four of the five members on TikTok Global’s board of directors will be American.
Oracle will host all US user data on its cloud platform and be tasked with “securing associated computer systems,” TikTok said in a statement.
“We are a hundred percent confident in our ability to deliver a highly secure environment to TikTok and ensure data privacy to TikTok’s American users, and users throughout the world,” Oracle CEO Safra Catz said in a statement.
TikTok Global also plans to create 25,000 US jobs as part of an expansion of its global headquarters, which will remain in the US. TikTok Global will pay more than $5 billion in new tax dollars to the US Treasury, according to Walmart. It will also create an educational program to “develop and deliver an AI-driven online video curriculum” that includes courses in math, reading, science, history and computer engineering for children.
Does that mean ByteDance owns 80% of TikTok Global?
There’s confusion over how big a role ByteDance would play in TikTok Global. ByteDance says that it will have an 80% stake in TikTok Global before the new company goes public.
But Ken Glueck, Oracle executive vice president, said in a statement that “upon creation of TikTok Global, Oracle/Walmart will make their investment and the TikTok Global shares will be distributed to their owners, Americans will be the majority and ByteDance will have no ownership in TikTok Global.”
A person familiar with the deal told The Wall Street Journal that ByteDance wouldn’t technically be an owner of TikTok Global because the shares would be given to ByteDance investors. About 40% of ByteDance is owned by US venture capital firms.
Meanwhile, a group of Republican US lawmakers has urged Trump to reject the deal if ByteDance still has control over TikTok’s US operations, data and algorithms. Trump has signaled that he wouldn’t approve a deal if Walmart and Oracle didn’t have most of the control over TikTok Global.
“They are going to own the controlling interest. Everything is going to be moved into a cloud done by Oracle … and it’s going to be totally controlled by Oracle,” he told Fox News. “If we find that they don’t have total control, then we’re not going to approve the deal.”
Why does Walmart want a stake in TikTok?
TikTok has been experimenting with e-commerce features. Last year, the company started allowing some users to add links to e-commerce sites so people can buy products that are shown in videos.
Walmart said it will “bring its omnichannel retail capabilities including its Walmart.com assortment, eCommerce marketplace, fulfillment, payment and measurement-as-a-service advertising service” to TikTok.
Does the Chinese government approve of the TikTok-Oracle deal?
China reportedly objected to a forced sale of TikTok’s US operations but the current deal structure isn’t a full divestment. Still, there are signs that Beijing isn’t fully comfortable with the proposal.
“Based on what I know, Beijing won’t approve current agreement between ByteDance, TikTok’s parent company, and Oracle, Walmart, because the agreement would endanger China’s national security, interests and dignity,” tweeted Hu Xijin, editor-in-chief of the Global Times. The tabloid is backed by China’s Communist Party.
In August, China issued new restrictions on artificial intelligence technology exports, a move that delayed the TikTok deal. Under the current proposal, ByteDance won’t be transferring its algorithm and technology to Oracle, which might satisfy Chinese regulators.
What comes next?
The legal battle is hardly over. TikTok haspending against the Trump administration to block the potential ban. A federal judge could issue an injunction to temporarily halt it.