TikTok Ban Averted: Trump Gives Oracle-Walmart Deal His 'Blessing'

Sep 20, 2020
Originally published on September 20, 2020 12:11 pm

Updated 12:55 a.m. ET

President Trump has given tentative approval to a deal that will keep TikTok alive in the U.S., resolving a months-long confrontation between a hit app popularized by lip-syncing teens and White House officials who viewed the service as a national security risk.

TikTok downloads were set to be banned in the U.S. starting at midnight Sunday, but that has now been averted.

"I have given the deal my blessing," Trump said. "I approve the deal in concept."

As part of the deal rescuing TikTok, U.S. tech company Oracle is joining hands with Walmart to form a new entity called TikTok Global, which will be headquartered in the United States.

That arrangement appears to satisfy the White House's concerns over the security of American user data, even though Chinese tech company ByteDance is expected to hold its majority-ownership position.

With the ties to ByteDance remaining, some experts in technology privacy are skeptical that the deal would meaningfully address the national security concerns that first launched Washington's scrutiny of TikTok.

"The interactions with the Chinese government, and the ability of the Chinese government to put pressure on the ByteDance company, is still substantial," said Chris Kelly, former chief privacy officer at Facebook.

"It won't be strange to have interaction between the two companies on a number of different issues, including algorithmic operations, so that could stretch into personal data pretty easily," Kelly said in an interview.

TikTok, which has some 100 million active monthly users in the U.S., is owned by Chinese tech giant ByteDance. For months, the Trump administration has been pushing TikTok to sever its ties to ByteDance. Officials in the White House and some Democrats in Washington fear China's authoritarian regime could access Americans' data through the app and use the information to blackmail or launch disinformation campaigns.

Under the new arrangement, Oracle will host all of TikTok's U.S. user data and will safeguard TikTok's computer systems "to ensure U.S. national security requirements are fully satisfied," TikTok said in a statement.

"While we strongly disagree with the implications of TikTok as a national security threat, we nonetheless understand the concerns," wrote Vanessa Pappas, interim head of TikTok, in a statement on Saturday. "We're pleased that today we've confirmed a proposal that resolves the Administration's security concerns and settles questions around TikTok's future in the US."

Analysts say Oracle's cloud computing business will receive a major boost as a result of the deal. Oracle has been lagging behind competitors, such as Amazon, Microsoft and Google, for cloud storage business. Oracle executives have close ties to Trump.

"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," said Oracle CEO Safra Catz, who served on Trump's 2016 transition team.

Oracle Executive Chairman Larry Ellison is among the few tech leaders in Silicon Valley who supports the president. Back in February, Ellison hosted a fundraiser for Trump at his estate in Rancho Mirage, Calif., just south of Palm Springs.

Analysts said Walmart also stands to reap much benefit by tapping into a vast consumer base of mostly young people.

Besides being a major investor in the new TikTok company, Walmart said it will bring its e-commerce "retail capabilities" to the app, which could allow TikTok users to shop Walmart online through TikTok.

A major sticking point in the negotiations centered on how much of a stake Beijing-based ByteDance would have in TikTok's U.S. operation., as officials in Washington worried that any ByteDance ownership could give the Chinese company a backdoor to access Americans' data.

Oracle and Walmart are planning to own a combined 20% of the new TikTok entity, officials at TikTok said.

ByteDance is expected to own about 80% of the company, but since 40% of ByteDance is owned by U.S. investors, TikTok Global says it is majority owned by American investors, according to a person familiar with the deal.

Still, ByteDance owning 80% of TikTok would not appear to satisfy the recommendation of the Committee on Foreign Investment in the United States, known as CFIUS, a panel led by the Treasury that examines U.S. business transactions with ties overseas.

Trump signed an order in August requiring ByteDance to completely divest from its U.S. TikTok operations by Nov. 12. The fate of that order is murky.

"They're really moving the goal posts here," said a former CFIUS official, who asked not to be named for fear of retaliation from the administration. "ByteDance is still the biggest dog in this deal. The foreign control issue does not go away."

Four out of the five members of TikTok Global's board of directors will be Americans, according to a joint statement from Oracle and Walmart. Among the four U.S. board members is Walmart CEO Doug McMillon.

Oracle and Walmart officials say that TikTok Global will create more than 25,000 new jobs and pay $5 billion in taxes to the Treasury, though specifics were not provided, such as over what period those taxes were expected to be paid.

In addition, TikTok Global said it will develop an educational curriculum driven by artificial intelligence to teach children basic reading, history and other subjects. It comes just days after Trump said he is creating a commission to promote "patriotic education" to counter the teaching of American slavery and racism in classrooms.

Treasury officials say the deal still needs to be finalized by Oracle and Walmart. CFIUS will also have to sign off on the agreement.

TikTok plans to raise money ahead of a planned initial public offering on the stock market in less than a year.

Copyright 2020 NPR. To see more, visit https://www.npr.org.

LULU GARCIA-NAVARRO, HOST:

A tentative deal has been reached over the popular app TikTok. Oracle, whose head, Larry Ellison, is close to President Trump, and Walmart will take over U.S. operations. TikTok downloads were set to be banned in the U.S. starting midnight tonight but no longer. NPR's tech reporter Bobby Allyn has more.

BOBBY ALLYN, BYLINE: This is how some of the hundred million Americans who use TikTok learned about the app being rescued - from a TikTok made by 17-year-old Bonnie Gumball in East Texas.

(SOUNDBITE OF TIKTOK)

BONNIE GUMBALL: Guys, you will not believe this. TikTok is saved because Trump just accepted the Oracle deal. You can read it all over the news right now.

ALLYN: Indeed, Trump says he's supporting a deal in which software company Oracle will team up with Walmart to form a new company, TikTok Global. Here's President Trump.

(SOUNDBITE OF ARCHIVED RECORDING)

PRESIDENT DONALD TRUMP: It will have nothing to do with China. It'll be totally secure. That'll be part of the deal, and it will be both Oracle, as you know, and Walmart.

ALLYN: Oracle will house TikTok's data on Americans. Walmart is a major investor and will let people shop for products through TikTok. The China part, though, Trump didn't get exactly right. Oracle and Walmart will own a combined 20% of the new company. TikTok's parent company in Beijing, ByteDance - they're keeping 80% of the company, all of which is to say months of executive orders, lawsuits and confusing mixed messages about the future of TikTok, and we're left with a new company that is mostly Chinese-owned?

CHRIS KELLY: The interactions with the Chinese government and the ability of the Chinese government to put pressure on the ByteDance company is still substantial.

ALLYN: Chris Kelly is the former chief privacy officer at Facebook. He says Oracle babysitting TikTok user data will provide a buffer against a possible intrusion from Chinese authorities, which has been what the White House's fear has been all along. But Kelly says having most of the app's ownership in Beijing could still be a vulnerability for the data of Americans.

KELLY: Will there be enough safeguards built in when there have been issues of foreign governments trying to infiltrate American companies? And so when you have that close tie that's remaining, will there be a complete ability to avoid that?

ALLYN: Trump signed an order last month saying ByteDance was supposed to completely divest from TikTok in the U.S., and that did not happen. But what's important is who the decision-makers are. TikTok says 4 out of the 5 new board members will be Americans. Weifeng Zhong researches U.S.-China economic relations at George Mason University.

WEIFENG ZHONG: If Oracle doesn't have the final say, I would be very skeptical about this deal.

ALLYN: However much power over TikTok Oracle has, it did emerge from all of this a big winner. Oracle is a software company that runs a cloud computing business that has been lagging behind Amazon, Microsoft and Google. Hosting millions and millions of users' data will be a big moneymaker for them. Trump and Oracle chief executive Larry Ellison have a history. Trump called him, quote, "a tremendous guy." Ellison is one of the few tech leaders who supports Trump. Earlier this year, he held a fundraiser for the president at his estate outside of Palm Springs, Calif. Bobby Allyn, NPR News, San Francisco.

(SOUNDBITE OF TEEN DAZE'S "NEW DESTINATION") Transcript provided by NPR, Copyright NPR.