TikTok’s national security deal was marred by internal strife

The panel — made up of representatives from the Treasury, DOJ, Commerce Department, DOD and others — could complete its review as early as next month, the people familiar with their deliberations said on condition of anonymity to speak about confidential political discussions. But first they must resolve the rift between the national security agencies and the Treasury Department, a rift that was previously unheralded.

Even if Washington orders TikTok to divest or reorganize, it would be one of the federal government’s most aggressive moves to restrict Chinese business interests in the United States on national security grounds. It will also complement a campaign launched in the US under former President Donald Trump to crack down on the app. Already, five states have banned the use of TikTok on government phones, and the US Senate on Wednesday unanimously passed a similar ban for federal devices.

National security agencies, including the Department of Defense and the intelligence community, as well as the DOJ, have been pressing the committee to issue an order that ByteDance sell its US TikTok operations to an American company. Set it up. As a separate business.

But the Treasury Department, which chairs the CFIUS panel, is wary of any direct exemption order, fearing it could face legal challenges similar to the Trump administration’s attempt to force the US version of TikTok to fail at the end of Trump’s tenure. , leaving the problem to Biden. The White House and Treasury declined to comment. The DOJ did not respond to a request for comment.

A person familiar with the process said DOD and other national security agencies are not closely involved, indicating that Treasury and DOJ will make the decision on the matter. The Treasury Department is also exploring options outside of CFIUS review to ensure that person protects national security.

Another person familiar with the deliberations said Treasury is more supportive of a compromise proposal worked out with TikTok that would allow ByteDance to retain at least nominal rights to the app in the United States. This agreement, first reported The New York Times reported in September that this includes splitting TikTok’s U.S. operations under a new subsidiary with an independent group of national security officials.

But that deal, which has been on the table for months, is still marred by debate among the agencies, raising the possibility of even tougher action if they fail to reach an agreement. Since it was proposed, FBI Director Christopher Wray has cast doubt on the deal, raising concerns in November and earlier this month that the Chinese government could use the app to collect US data or influence its mechanisms, affecting what users see. These concerns are “very much” of the debate at CFIUS, he told an audience at the University of Michigan. According to At Bloomberg.

A likely outcome of the CFIUS review is an order forcing ByteDance to divest from the U.S. app if the parties can’t decide how to safely structure a U.S.-based TikTok subsidiary, a person familiar with the matter said. President Joe Biden may also choose to boycott the debate.

A TikTok spokesperson said the company has been working with CFIUS for more than two years to “address all reasonable national security concerns” about its presence in the United States, and urged the government to approve a proposed compromise that avoids the investment.

“CFIUS is currently considering a comprehensive settlement addressing corporate governance, content recommendation and moderation, as well as data protection and access,” said Brooke Oberwetter, a spokesperson for TikTok, referring to the proposed settlement agreement. The solution CFIUS is considering is a comprehensive set of measures with layers of government and independent oversight to address concerns about TikTok’s content recommendation and access to US user data — measures that go beyond this. What does any peer company do today? »

He added that TikTok has already made “significant progress” in implementing aspects of the mitigation plan. “Additional measures are unnecessary and punitive; They send a chilling message to foreign technology companies looking to do business in the United States and offer globally operable experiences to compete with other global platforms.

Meanwhile, lawmakers are growing impatient with slow progress. On Capitol Hill, efforts to stop the app from working entirely in the US are gaining momentum.

“I wanted to give them the benefit of the doubt — a chance — but this has been going on for over a year and we still don’t know anything … My concerns have obviously increased, not decreased.” The Senate panel said. President Mark Warner (D-Va.).

Warner said Wednesday that he does not endorse any legislative effort to regulate or ban TikTok, such as the bill introduced this week by a ranking member of the Intelligence Committee. Marco Rubio (R-Fla.) — because he waited for the Biden administration to act. But patience is waning among intelligence chiefs, who now say even forced separation is not good enough.

But for some China hawks, the mitigation plan and treasury allocations are not enough. Rubio raises doubts This week, Capitol Hill wondered whether China’s national security laws would allow it to completely break away from the U.S. version of the Byte Dance app. Warner said he was concerned about any deal that could give up Chinese rights to TikTok, fearing that CCP could still affect the recommendation algorithms the app uses to deliver content to viewers.

“I’m waiting to hear the case for that,” Warner said of a deal that would leave Byte Dance under TikTok’s nominal control. “But this case has become difficult to form in my mind. »

Divestment comes with its own risks, including valuation and regulatory uncertainties. TikTok could be worth hundreds of billions of dollars, making it difficult for even wealthy buyers to afford it. Any company with a strategic interest in buying the company would raise serious issues for US antitrust law. Oracle previously tried to buy the U.S. version of TikTok after Trump ordered ByteDance to divest in 2020, but that deal fell through, leaving the issue to Biden’s White House.

Independent of the CFIUS review, the Biden administration is also drafting an executive order to limit the ability of TikTok and other foreign apps to collect US data and sell or transfer it to third parties. The order has been on hold for months as Congress and CFIUS address the TikTok issue, said one of the people with knowledge of the planning, but could be released as early as next year.

Josh Cisco contributed to this report.