TikTok filed a petition with a federal appeals court on Tuesday requesting a review of the actions of a federal body as President Donald Trump’s deadline for the sale of the popular Chinese-owned video-sharing app looms.
TikTok and parent company ByteDance asked the US Court of Appeals for the DC District to examine the actions of the Committee on Foreign Investment in the United States, along with Trump’s executive order banning the app in the US, in relation to ByteDance’s 2017 acquisition of Musical.ly, a social media app that was rebranded as TikTok.
“For a year, TikTok has actively engaged with CFIUS in good faith to address its national security concerns, even as we disagree with its assessment,” a TikTok spokesperson said. “In the nearly two months since the president gave his preliminary approval to our proposal to satisfy those concerns, we have offered detailed solutions to finalize that agreement – but have received no substantive feedback on our extensive data privacy and security framework.”
CFIUS reviews foreign acquisitions for potential national security risks and has the power to block deals.
In late October, a federal judge granted a preliminary injunction against the Trump administration’s threatened shutdown of TikTok in the US, finding a ban against the popular Chinese-owned app hampers free speech. The ban, she said, would “have the effect of shutting down, within the United States, a platform for expressive activity used by approximately 700 million individuals globally.”
The legal actions follow a pair of Trump executive orders signed in August that target the short-video app. The first executive bars any US transactions with TikTok’s Chinese parent company, ByteDance, because of concernns 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.
A second executive order, issued later in August, ordered ByteDance to sell its US operations by Nov. 12, leading to a potential deal with Oracle and Walmart, which is currently up in the air. Unanswered questions remain about the relationships that TikTok, Oracle and Walmart will have. There’s also confusion about ByteDance’s role 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.