Less than two months after TikTok came under fire appear to censor video & # 39; s related to the pro-democracy protests in Hong Kong, the app faces a new challenge from the US government. The Foreign Investments Committee in the United States (CFIUS) has contacted TikTok & # 39; s Chinese parent company ByteDance with concern that the app could pose a threat to US citizens.
Those concerns are most likely to lead to an evaluation of national security – an evaluation that lawmakers on both sides of the aisle have been asking for since the beginning of October. In the end, ByteDance could be forced to sell out Musical.ly, the American company that took over in 2017 and helped launch the viral success of TikTok. If that happens, it could mean the end of TikTok in the US and serve as a warning to any Chinese company that wants to break through on the US market.
The focus of CFIUS on technology is relatively new. For the past 30 years, the committee, chaired by the Treasury Secretary, has been in charge of structuring mergers and acquisitions between US and foreign companies in a way that protects US national security interests. CFIUS typically wants US companies to set up US-based leadership teams and US-based servers to ensure that the Chinese government does not have a free hand with data about US citizens.
Under the Trump administration, the role of the committee has been expanded, especially with regard to Chinese investments in technology companies. "The scope of the CFIUS authority has recently been expanded with regard to foreign investment in sensitive technologies," said Robert Williams, executive director of the Paul Tsai China Center at Yale Law School.
In 2018, CFIUS began working hard on Chinese technical mergers, a sign that it was increasingly concerned about access from foreign governments to sensitive user data. On January 2, 2018 CFIUS the plan of the Chinese company Ant Financial to take over the American financial organization MoneyGram, stating national security risks. "The MoneyGram episode is potentially instructive because it seems that concerns about a Chinese company that has access to data about US citizens have motivated the blockage of that transaction," Williams said.
The committee has also started rolling back deals that have already gone ahead. CFIUS was forced in March Beijing Kunlun Tech Co. Ltd sells the gay hookup app Grindr, after an investigation had shown that user data was a threat to US citizens. “The Chinese government has probably shown a lot of interest in that data, which could be useful to tackle dissidents at home and for blackmail abroad. As a Chinese company, Kunlun is unlikely to do anything to prevent the government from accessing user data & # 39 ;, wrote The edgeCasey Newton.
Not every acquisition between a foreign and American company requires approval from CFIUS. The approval process is voluntary and only required when the deal is a potential threat to national security. TikTok did not bother to erase the Musical. Traded with CFIUS, which gives the committee reasons to investigate it now.
The outcome of their research will likely depend on whether TikTok can prove its independence from ByteDance, something the company is already working on. In a statement on October 24, TikTok said: "Let's be very clear: TikTok does not remove content based on China's sensitivities." Vanessa Pappas, general manager of the company, also tried address the concerns of senators with regard to data securityand notes that from January all TikTok user data will be stored in the US.
"There is the possibility to structure a mitigation agreement that allows the company to continue to own Musical.ly and operate in the US under restrictive conditions and reporting requirements," added Williams. If that fails, CFIUS can force ByteDance to sell the company. "There are still some open questions about the extent to which companies can appeal through the judicial system against a CFIUS or presidential decision," Williams said.
Samantha Hoffman, an analyst with the Australian Strategic Policy Institute, said the committee's concerns are justified. "The (communist) party of China collects bulk data abroad and then uses it to help with matters related to state security, such as propaganda and identifying public sentiment to understand how people think about a particular problem," she said. "It's about managing the media environment globally. Once you have control, you can use it to influence and shape the conversation. & # 39;
Those monitoring problems are much greater than just TikTok. "The Chinese government has a history of controlling nodes in the information system," said Sarah Cook, a senior research analyst for China, Hong Kong, and Taiwan at Freedom House. “They don't always mobilize them immediately to harm freedom of expression, until something threatening happens and then they do it. It seems clear that TikTok is censoring information regarding the Hong Kong protests, but at the same time, even if it doesn't happen that often now, it's really just a matter of time before it happens. "
The recent expansion of CFIUS is probably an attempt to counter China's growing power. "What is interesting about this case is that the decision is clearly not based solely on the personal information that may be accessible," said Nevena Simidjiyska, a partner at Fox Rothschild LLP, who noted that censorship questions have traditionally not been addressed by the Commision. "This is a new area for CFIUS regulation that will bring much more social media companies to the attention."
At the heart of the debate is how far China's control extends beyond their national borders – a question on which US legislators focus. When TikTok seemed to be crushing content related to pro-democracy protests in Hong Kong, Senators such as Josh Hawley (R-MO) and Marco Rubio (R-FL) called for an investigation. Then more conference leaders were added former employees TikTok told The Washington Post they were instructed to remove political posts. "There is sufficient and growing evidence that TikTok & # 39; s platform for Western markets, including the US, censors content in accordance with # China communist guidelines," Rubio tweeted.
Mailed to in a statement The edge, he added: "I remain deeply concerned that any platform or application with Chinese ownership or direct links to China, such as TikTok, can be used as a tool by the Chinese Communist Party."
His concern was reflected in a letter Sen. Chuck Schumer (D-NY) and Sen. Tom Cotton (R-AR) wrote to actress National Intelligence Director Joseph Maguire at the end of last month. "While ByteDance claims that TikTok is not active in China and is storing US user data in the US, ByteDance is still obliged to abide by China's laws," the senators wrote.
The question is far from hypothetical. According to the Freedom on the Net 2019 report by Freedom House, China is the worst abuser of internet freedom in the world. "Censorship reached unprecedented extremes when the government improved its information controls before the 30th anniversary of the Tiananmen Square massacre and in the presence of widespread anti-government protests in Hong Kong," the report reads.
But according to Hoffman, it will be difficult to achieve true independence – especially for TikTok & # 39; s parent company. "If we are talking about a company in the (People's Republic of China), I would say that it is impossible that they are not influenced by the Chinese government," she said. “It doesn't matter what the intention of the person who founded the company is. That's not the point. It is about how the system works. "