Daily Management Review

TikTok Intensifies Efforts To Reach A U.S. Security Agreement


TikTok Intensifies Efforts To Reach A U.S. Security Agreement
As it tries to persuade the U.S. government to permit it to continue being owned by Chinese technology company ByteDance, well-known short-video app TikTok is offering to run more of its business at arm's length and subject it to outside scrutiny, according to people familiar with the matter.
For the past three years, TikTok has worked to reassure U.S. government departments and agencies that neither the Chinese Communist Party nor any other organization under its control can access nor alter the personal data of American citizens.
President Joe Biden overturned a ban on TikTok issued by his predecessor Donald Trump last year, but talks between his administration and the social media platform continued regarding a potential agreement that would address the security issues.
In an effort to put pressure on the White House to take a tough stance against China as part of a larger dispute involving trade, intellectual property, and human rights, U.S. lawmakers have seized on security concerns regarding TikTok.
In order to placate the American government, TikTok has already announced a number of initiatives, including a deal with Oracle Corp. to store user data in the country and the creation of a United States Data Security (USDS) division to manage data protection and content moderation choices. According to a source with knowledge of the situation, it has invested $1.5 billion in hiring and organizational costs to develop that unit.
The sources claim that some government officials, including those at the Federal Bureau of Investigation, the Central Intelligence Agency, and the U.S. Department of Defense, continue to be opposed to a security agreement.
These officials contend that because ByteDance, which also manages the Chinese short-video app Douyin, provides the technology behind TikTok, users would still be at risk.
TikTok has tried to add more layers of regulation to the American government in order to get around these obstacles. According to the sources, Oracle's role has been expanded to include ensuring that TikTok's technological foundation is distinct from ByteDance's.
According to the sources, Oracle will examine both the server codes, which provide features like search and recommendations, and the app codes, which control how TikTok looks and feels. According to one of the sources, the reviews will take place at specialized "transparency centers" that Oracle engineers will visit; the first one is expected to open in Maryland in January.
According to the sources, TikTok has also suggested setting up a "proxy" board that would run the USDS division independently of ByteDance. Until a security agreement with the U.S. is reached, this division is led interim by Andrew Bonillo, a former U.S. Secret Service agent, and it reports to TikTok CEO Shou Zi Chew.
The Committee on Foreign Investment in the United States (CFIUS), a national security panel, would screen three members of the USDS board, according to the sources. Despite paying for the USDS division's operations, ByteDance would not have any influence over the board or its decisions, the sources continued.
According to the sources, TikTok has also been looking to hire independent auditors and monitors who would be paid by the company but report to CFIUS. It has requested proposals from businesses and consultants for some of the roles, and it has set a deadline for responses in the first half of January.
The sources spoke on condition of anonymity about the expanded role of Oracle, the proposed proxy board, and specifics of the TikTok hiring and spending, which are being reported here for the first time.
A spokeswoman for TikTok declined to comment on the specific concessions the company has made to the American government, but she did claim that the company's response to CFIUS's security concerns was "comprehensive."
She continued by saying that since the end of the summer, TikTok has not spoken with the American government "on the substance of the proposed agreement."
"We have made substantial progress on implementing that solution over the past year, and look forward to completing that work to put these concerns to rest," the TikTok spokeswoman said.
An inquiry for comment from Oracle was not answered. The Treasury Department, which oversees CFIUS, declined to comment beyond stating that the panel was dedicated to preserving national security. Regarding the CFIUS investigation of TikTok, the White House declined to comment.
According to one of the sources, U.S. representatives taking part in the negotiations have suggested that many of the voluntary security measures TikTok is putting in place may form part of any agreement that would allow ByteDance to keep its ownership. It is uncertain, though, whether Biden's administration will ultimately approve a security agreement with TikTok.
According to the sources, the U.S. Treasury Department and the Department of Justice, which have been in charge of the negotiations with TikTok, are open to a deal in order to avoid the kind of legal challenge from the company that stymied Trump's attempt to force a divestment.
The White House will ultimately decide the outcome because Biden will be asked to weigh in on the arguments made by the various government departments and agencies that are either in favor of or against a deal, according to the sources.