By John D. McKinnon and Alex Leary
WASHINGTON -- A U.S. plan to force the sale of TikTok's American
operations to a group including Oracle Corp. and Walmart Inc. has
been shelved indefinitely, people familiar with the situation said,
as President Biden undertakes a broad review of his predecessor's
efforts to address potential security risks from Chinese tech
companies.
The TikTok deal -- which had been driven by then-President
Donald Trump -- has languished since last fall in the midst of
successful legal challenges to the U.S. government's effort by
TikTok's owner, China's ByteDance Ltd.
In a new development late Wednesday, the Biden administration
asked to delay the government's appeal of a federal district court
judge's December injunction against the TikTok ban.
In a court filing, the Biden administration said it had begun a
review of the agency action that would help it determine whether
the national security threat cited by the Trump administration
continues to warrant the ban. The filing by the Justice Department
said the request for a delay is unopposed by TikTok and
ByteDance.
Discussions continue between representatives of ByteDance and
U.S. national security officials, the people familar with the talks
said. Those discussions have centered on data security and ways to
prevent the information TikTok collects on American users from
being accessed by the Chinese government, they said.
But no imminent decision on how to resolve the issues
surrounding TikTok is expected as the Biden administration
determines its own response to the potential security risk posed by
Chinese tech companies' collection of data.
"We plan to develop a comprehensive approach to securing U.S.
data that addresses the full range of threats we face," National
Security Council spokeswoman Emily Horne said. "This includes the
risk posed by Chinese apps and other software that operate in the
U.S. In the coming months, we expect to review specific cases in
light of a comprehensive understanding of the risks we face."
Mr. Trump last year ordered a ban on TikTok aimed at forcing a
sale of the popular video-sharing app to a majority-U.S.-ownership
group.
A few days later, the Committee on Foreign Investment in the
U.S. -- an interagency group that monitors security risks in
cross-border business deals -- formally ordered ByteDance to divest
itself of U.S. operations.
TikTok asked a federal appeals court in Washington in November
to vacate the divestiture order, calling it arbitrary and
capricious. TikTok said it was prepared to discuss other ways to
address the government's security concerns.
While that case is pending, separate federal court rulings have
blocked the government from shutting TikTok down. The most recent
ruling on Dec. 7 said Mr. Trump's executive order likely
overstepped his authority under the International Emergency
Economic Powers Act.
Talks between the Committee on Foreign Investment in the U.S.
and TikTok to resolve the situation have continued, according to
the people familiar with the matter, one of whom said possible
solutions include use of a trusted third party to manage TikTok's
data, which wouldn't require an outright sale.
White House press secretary Jen Psaki declined Wednesday to
discuss details of the Cfius review.
"I will note, broadly speaking, that we are comprehensively
evaluating the risks to U.S. data including from TikTok and will
address them in a decisive and effective fashion," Ms. Psaki said
at her daily press briefing. "If we have news to announce we will
announce it."
Ms. Psaki declined to give a timetable for completion of the
broad review of China tech policy that goes beyond TikTok.
Any deal would likely be different from the one discussed last
September, the people said, in part because TikTok no longer faces
the threat of an imminent shutdown.
Any sale would also need the approval of Chinese regulators.
Beijing last year adopted new restrictions on exporting certain
types of social-media algorithms that TikTok uses, further
complicating deal talks.
ByteDance founder Zhang Yiming resisted the sale of TikTok last
year despite calls from his large Western investors to do so.
ByteDance, which counts General Atlantic and Sequoia Capital among
its backers, was valued at $180 billion in December, according to
investment data research company PitchBook.
Mr. Zhang recently spoke to ByteDance's employees globally,
encouraging them to keep working and to wait for the geopolitical
storm to pass, according to staffers interviewed by The Wall Street
Journal.
Oracle, Walmart and others could still figure in a possible
deal, the people familiar with the situation said, but much depends
on how the Biden administration pursues the initiatives against
TikTok that were launched by Mr. Trump's White House.
That response could start coming into focus next week.
On Feb. 18, the government's formal response to TikTok's court
challenge against Mr. Trump's executive order is due. The Justice
Department declined to comment on whether it would continue to
defend Mr. Trump's order.
Also next week, another executive order signed by Mr. Trump is
set to go into effect that would ban U.S. transactions with eight
China-related apps, including the Alipay mobile-payment platform
owned by the Chinese billionaire Jack Ma's Ant Group Co., and the
WeChat mobile payment app owned by China's Tencent Holdings
Ltd.
While the Biden administration could enforce the order, it could
also extend the deadline, substitute a new order or simply rescind
the order outright.
Trump administration officials had contended that Chinese tech
companies such as ByteDance, Huawei Technologies Co. and others
pose a national security threat because they can be forced to share
their data on Americans with China's authoritarian government.
The companies have said they would never do so, but Mr. Trump's
concerns have been shared by both Democrats and Republicans in
Congress.
The Biden administration's review is being led by officials who
have sometimes been critical of Mr. Trump's targeting of Chinese
tech companies, although they have expressed a range of views on
how to respond to the complex challenge.
Jake Sullivan, Mr. Biden's new national security adviser, and
Kurt Campbell, his White House coordinator on China policy, have
publicly criticized Mr. Trump's crackdown on Chinese tech companies
such as Huawei as unilateral and uncoordinated with other Western
nations.
Protecting U.S. advantages in technology will require enhanced
restrictions on China, they wrote in a 2019 article in Foreign
Affairs, "but these efforts should be pursued selectively rather
than wholesale, imposing curbs on technologies that are critical to
national security and human rights and allowing regular trade and
investment to continue for those that are not."
They added that "overreach on technology restrictions could
drive other countries toward China."
Another of the Biden administration officials who will likely
help to shape policy is Peter Harrell, who is now the senior
director at the National Security Council for international
economics and competitiveness.
Before taking office, Mr. Harrell applauded suggestions for
more-lenient approaches to the problems presented by TikTok.
"Strongly agree that the best way for US to address TikTok is
for TikTok to become a leader in transparency and data privacy,
rather than banning it," Mr. Harrell tweeted last summer.
As court challenges to Mr. Trump's initiative by TikTok and its
allies began to succeed, Mr. Harrell cheered those victories.
"I take the threat of Chinese surveillance seriously, but it is
welcome news that the courts may be beginning to push back on
unbounded executive power," he said in another tweet.
Whatever shape a possible TikTok deal takes, it is not likely to
feature the $5 billion fund for education that Mr. Trump had said
Oracle and Walmart were preparing to create as part of the deal,
according to one of the people familiar with the situation.
Mr. Trump had demanded that the buyers provide compensation to
the government for forcing the sale, which he likened to key money
-- or an extra fee for securing a hard-to-get property -- that
tenants sometimes pay landlords.
Walmart continues to work more closely with TikTok regardless of
an investment, moving toward providing warehouse and shipment
support for sales made through TikTok, as well as marketing
initiatives that promote Walmart's products within TikTok,
according to other people familiar with the situation.
--Georgia Wells, Sarah Nassauer, Raffaele Huang and Liza Lin
contributed to this article.
Write to John D. McKinnon at john.mckinnon@wsj.com and Alex
Leary at alex.leary@wsj.com
(END) Dow Jones Newswires
February 10, 2021 17:02 ET (22:02 GMT)
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