US government to review deal between TikTok and Oracle


The US treasury secretary, Steven Mnuchin, confirmed on Monday that the Trump administration would this week review a deal between Oracle and the US operations of the video-sharing app TikTok.

The hugely popular app has been caught in a geopolitical standoff, with the Trump administration accusing it of spying on Americans and Chinese officials attacking US protectionism.

“From our standpoint, we’ll need to make sure that the code is, one, secure, Americans’ data is secure, that the phones are secure and we’ll be looking to have discussions with Oracle over the next few days with our technical teams,” Mnuchin told CNBC.

ByteDance, TikTok’s parent company, has been in talks to sell its US business since Trump threatened last month to ban the service if it was not sold. The president’s executive order in August gave American companies until 15 September to stop doing business with the video platform’s Chinese parent company, or it would be shut down in the US. It effectively set a deadline for a potential pressured sale of part of the tech company to an American bidder.

But the nature of an Oracle-TikTok deal remains unclear. And any deal will also now need approval from the Chinese authorities after Beijing changed its export rules a few weeks ago.

The Washington Post reported that Oracle had been chosen by ByteDance as a “technology partner” to allay US concerns, and Reuters quoted a source saying it would be a restructuring rather than a sale, with Oracle handling TikTok’s US user data. The source did not disclose how much of TikTok’s US operations ByteDance and its investors would continue to own.

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Oracle’s chairman, Larry Ellison, is a Trump supporter and has held fundraising events for his re-election.

However, Chinese state media, citing sources, reported on Monday that ByteDance would not be selling TikTok’s US operations to Oracle.

ByteDance will need approval for the deal from both Washington and Beijing, which recently implemented new export controls on the kind of artificial intelligence technology behind TikTok’s algorithm for deciding which videos to serve to users.

It is not clear whether Trump, who wants a US technology company to own most of TikTok in the US, will approve the proposal. Beijing reportedly opposes a forced sale of TikTok’s US operations and would prefer the company shut down, according to a previous Reuters report, citing three people familiar with the matter.

ByteDance and Oracle did not immediately respond to requests for comment. The White House declined to comment.

Oracle primarily makes database software. It competes with tech firms such as Microsoft and Amazon that provide cloud services as well as business software specialists such as Salesforce.

Microsoft said on its blog on Sunday that ByteDance would not sell TikTok’s US operations, despite the company being “confident our proposal would have been good for TikTok’s users, while protecting national security interests”.

“To do this, we would have made significant changes to ensure the service met the highest standards for security, privacy, online safety, and combating disinformation, and we made these principles clear in our August statement.”

Retailer Walmart, which had been participating in negotiations with Microsoft, still had an interest in a TikTok investment, and was still in discussions with ByteDance leadership and other parties, Reuters reported.

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“We know that any approved deal must satisfy all regulatory and national security concerns,” Walmart said.

It is unclear whether TikTok’s algorithm, considered its key asset, would be included in any sale. The state-run China News Agency said on Monday that ByteDance had decided its algorithm would not be sold or transferred.

On Monday, the South China Morning Post said ByteDance would not sell or transfer the algorithm behind TikTok in any sale or divestment deal, quoting a source briefed on the Chinese company’s boardroom discussions and citing new Chinese government export controls.

In late August, Beijing issued new restrictions or bans on tech exports, requiring companies to seek government approval – a process that can take up to 30 days. The rules, which had not been updated since 2008, were believed to be aimed at delaying the sale of TikTok to US buyers.

Some technologies were removed from the list of regulated exports, including vaccine technologies, but the 23 new additions included tech relating to AI interfaces, voice recognition, and content recommendation analysis.

TikTok’s feeds of short video clips feature everything from hair-colouring tutorials to dance routines and jokes about daily life. It has been downloaded 175m times in the US and more than a billion times around the world.

Trump has claimed TikTok could be used by China to track the locations of federal employees, build dossiers on people for blackmail, and conduct corporate espionage.

The company has said it has never provided any US user data to the Chinese government, and Beijing has attacked Trump’s crackdown as political.

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“It is not just TikTok. Hi-tech Chinese companies in the US have been attacked partly on the grounds of so-called national security. Starting with the attack on Huawei, the scope has become more and more extensive,” said Shi Yinhong, an expert in US-China relations at Renmin University, in Beijing.

Additional reporting by Lillian Yang



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