- [Narrator] TikTok is at a crossroads.
Concerns about its Chinese ownership
have been building since 2020.
- TikTok's been in this limbo for two years,
and who knows how many more months
or years it could stay in this limbo.
- [Narrator] And a panel of US officials
is torn on how to address them.
If they can't come to an agreement,
there's another possible solution,
forcing TikTok to become a US company.
Here's what it would take to make that happen,
and why that move poses some big challenges.
First, a brief review of how TikTok's data is managed,
which is the main focus for US officials.
- TikTok's this huge company, but it's owned
by a Chinese parent company called ByteDance.
They run several apps,
but TikTok is probably their best known one in the world.
- [Narrator] ByteDance itself is headquartered in Beijing,
and is owned by investors from around the globe.
A Chinese state controlled entity
owns 1% of a Beijing based subsidiary of ByteDance.
Those connections are what some are worried about,
and for a couple of reasons.
- The first concern is that
the Chinese government could order TikTok
to hand over data about individual American users.
So what kind of videos they watch,
and maybe even their IP addresses,
which could identify their location.
The second big thing
is the video recommendation algorithm,
and the idea is that the Chinese government
could order TikTok to control
what videos Americans could watch.
- [Narrator] TikTok says it has already started
to address some of those concerns.
The company recently said that
all US user traffic is now being routed
through cloud servers operated
by the US based company Oracle.
And TikTok says that only members
of its US data security team have access to that data.
But backups are still being saved
to other non-Oracle servers in the US
and Singapore, the company says,
but it's phasing those out.
As for TikTok's recommendation algorithm,
that was created by its Chinese parent company ByteDance.
TikTok says changes to the algorithm are monitored
by Oracle before they're implemented in the US app.
- So anytime there's a change
to the algorithm that influences
what kind of videos Americans see,
they see that Oracle will have full access to see,
you know, what the algorithm does.
- [Narrator] A spokesperson
for the Chinese Foreign Ministry
said in a press conference in November
in regards to TikTok that
"Spreading disinformation
and then using it to hobble Chinese companies
has become a go-to tool for the US government."
But some US lawmakers still want TikTok
to have more separation from China.
One option is a divestiture order or a forced sale,
which could cut ties to Chinese ownership.
- The Chinese government would
theoretically have less power over TikTok,
to force TikTok to do something like spy
or control what videos Americans watch.
- [Narrator] A divestiture order is what happened
to the dating app Grindr in 2019,
after US officials determined
that the app's personal data
could potentially be exploited for blackmail,
since the majority stakeholder was a Chinese company.
Here's how the process has worked in past cases.
First, an executive body branch called
the Committee on Foreign Investment in the United States,
or CFIUS, opens a case with the involved companies.
This is the panel that's been talking to TikTok.
It's made up of representatives
of nine US departments and agencies,
led by the Treasury,
and reviews foreign transactions to see
if they might be a national security risk.
After CFIUS reviews a company or merger,
it can make recommendations to mitigate those risks,
which can include asking foreign investors
or owners to sell their stake in the company.
In extreme cases, it can also escalate the case
to the president, who can order a forced sale.
That owner then has to find a suitable buyer,
usually one within the US.
Then the buyer and seller might have to go back
to CFIUS in order to get the sale approved.
Grindr took just over a year after the order was made
to find a buyer and get approval.
The president never issued an order.
But TikTok is a much bigger name
and forcing a sale could be more complicated.
- There's been nothing of this scale, this popularity.
Usually, you know, CFIUS deals
with a lot smaller cases here.
So this is like the case
of the century for CFIUS lawyers in Washington in DC.
- [Narrator] A treasury official
said that CFIUS does not publicly comment
on transactions that it may or may not be reviewing.
Officials are worried about
a number of challenges facing a forced sale.
One is that the Trump administration already tried it.
- They have till September 15th to make a deal.
After that, we closed it up in this country.
- [Narrator] In 2020, that administration
issued an order that would've effectively banned TikTok,
unless it sold itself to a US buyer.
But TikTok pushed back and took the order
to a federal appeals court,
arguing that the deal denied the company due process.
It was still tied up in legal issues
by the time Joe Biden got into office,
and the order was shelved
as his administration conducted its own security review.
But his administration could face similar pushback
from TikTok if it tries to force a sale,
and doing so could risk diluting CFIUS' authority.
- Their power is based on having
these vague broad powers,
and if they go to court, even if they win in court,
a court might put parameters
on that power, might define that power,
'cause the more vague your power is,
the more powerful it is.
- [Narrator] Even without legal hurdles,
a sale would also need cooperation
from the Chinese government,
which has the power to restrict
the exports of technology,
such as TikTok's video recommendation algorithm.
- If China does not allow the algorithm to be sold,
then can TikTok continue operating in the US?
We don't know.
We're in totally uncharted waters right now.
- [Narrator] While CFIUS decides what to do,
some lawmakers have taken concerns into their own hands.
TikTok has been banned
on government devices in a majority of states.
And in December,
the federal government implemented a similar ban.
- The only sensible next step
is for this congress to act to make that ban
across the board for all federal devices.
- [Narrator] At least one bill
has been introduced to ban TikTok
entirely in the United States.
- That has legal problems too.
That could potentially face a First Amendment problem.
Can you actually stop,
can you actually ban TikTok from operating in the US?
Especially when it has more
than 100 million American users.
- [Narrator] While TikTok has made concessions,
including how its data is managed,
to get to an agreement with CFIUS,
talks are ongoing without a clear deadline.
(upbeat music)