Trump Agrees To Oracle-Walmart Deal : NPRSeptember 20, 2020
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Updated 12:55 p.m. ET
President Trump has given tentative approval to a deal that will keep TikTok alive in the U.S., resolving a months-long confrontation between a hit app popularized by lip-syncing teens and White House officials who viewed the service as a national security risk.
TikTok downloads were set to be banned in the U.S. starting on midnight Sunday, but that has now been averted.
“I have given the deal my blessing,” Trump said. “I approve the deal in concept.”
As part of the deal rescuing TikTok, U.S. tech company Oracle is joining hands with Walmart to form a new entity called TikTok Global, which will be headquartered in the U.S.
That arrangement appears to satisfy the White House’s concerns over the security of American user data, even though ByteDance is expected to hold its majority ownership position.
With the ties to ByteDance remaining, some experts in technology privacy were skeptical that the deal would meaningfully address the national security concerns that first launched Washington’s scrutiny on TikTok.
“The interactions with the Chinese government, and the ability of the Chinese government to put pressure on the ByteDance company, is still substantial,” said Chris Kelly, the former chief privacy officer at Facebook.
“It won’t be strange to have interaction between the two companies on a number of different issues, including algorithmic operations, so that could stretch into personal data pretty easily,” he said in an interview.
TikTok, which has some 100 million active monthly users in the United States, is owned by Chinese tech giant ByteDance. For months, the Trump administration has been pushing TikTok to sever its ties to ByteDance. Officials in the White House and some Democrats in Washington fear China’s authoritarian regime could access Americans’ data through the app and use the information to blackmail or launch disinformation campaigns.
Under the new arrangement, Oracle will host all of TikTok’s U.S. user data and will safeguard the TikTok’s computer systems “to ensure U.S. national security requirements are fully satisfied,” TikTok said in a statement.
“While we strongly disagree with the implications of TikTok as a national security threat, we nonetheless understand the concerns,” wrote Vanessa Pappas, Interim Head of TikTok in a statement. “We’re pleased that today we’ve confirmed a proposal that resolves the Administration’s security concerns and settles questions around TikTok’s future in the U.S.”
Analysts say Oracle’s cloud computing business will receive a major boost as result of the deal. Oracle has been lagging behind competitors, like Amazon, Microsoft and Google for cloud storage business. Oracle executives have close ties to President Trump.
“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,” said Oracle CEO Safra Catz, who served on Trump’s 2016 transition team.
Oracle chief executive Larry Ellison is among the few tech leaders in Silicon Valley who supports the president. Back in February, Ellison hosted a fundraising for Trump at his estate in Rancho Mirage, Calif., just south of Palm Springs.
Besides being a major investor in the new TikTok company, Walmart said it will bring its e-commerce “retail capabilities” to the app, which could allow TikTok users to shop on Walmart online store through the app.
A major sticking point in the negotiations centered on how much of a stake Beijing-based ByteDance would have in TikTok’s U.S. operation., as officials in Washington worried that any ByteDance ownership could give the Chinese company a backdoor to access Americans’ data.
Oracle and Walmart are planning to own a combined 20% of the new TikTok entity, officials at TikTok said.
Beijing-based ByteDance is expected to own about 80% of the company, but since 40% of ByteDance is owned by U.S. investors, TikTok Global says it is majority-owned by American investors, according to a person familiar with the deal.
TikTok plans to raise money ahead of a planned initial public offering on the stock market in less than a year.
Still, ByteDance owning 80% of TikTok would not appear to satisfy the recommendation of the Committee on Foreign Investment in the United States, known as CFIUS, a panel led by the Treasury that examines U.S. business transactions with ties overseas.
Trump signed an order in August requiring ByteDance to completely divest from its U.S. TikTok operations by November 12. The fate of that order is murky.
“They’re really moving the goalposts here,” said a former CFIUS official, who asked not be named for fear of retaliation from the administration. “ByteDance is still the biggest dog in this deal. The foreign control issue does not go away here.”
Four out of the five members of TikTok Global’s Board of Directors will be Americans, according to a joint statement from Oracle and Walmart. Among the four U.S. board members is Walmart CEO Doug McMillon.
Oracle and Walmart officials say that TikTok Global will create more than 25,000 new jobs and pay $5 billion in taxes to the Treasury.
In addition, TikTok Global said it will develop an educational curriculum driven by artificial intelligence to teach children basic reading, history and other subjects. It comes just days after Trump said he is creating a commission to promote “patriotic education” to counter the teaching of American slavery and racism in classrooms.
Treasury officials say the deal still needs to be finalized by Oracle and Walmart. CFIUS will also have to sign off on the agreement.