The US government has launched a national security review of TikTok
owner Beijing ByteDance Technology Co's $1 billion (roughly Rs. 7,070
crores) acquisition of US social media app Musical.ly, according to
three people familiar with the matter.
While the $1 billion (roughly Rs. 7,070 crores) acquisition was completed two years ago, US lawmakers have been calling in recent weeks for a national security probe into TikTok,
concerned the Chinese company may be censoring politically sensitive
content, and raising questions about how it stores personal data.
TikTok
has been growing more popular among US teenagers at a time of growing
tensions between Washington and Beijing over trade and technology
transfers. About 60 percent of TikTok's 26.5 million monthly active
users in the United States are between the ages of 16 and 24, the
company said this year.
The Committee on Foreign Investment in the United States (CFIUS),
which reviews deals by foreign acquirers for potential national security
risks, has started to review the Musical.ly deal, the sources said.
TikTok did not seek clearance from CFIUS when it acquired Musical.ly,
they added, which gives the U.S. security panel scope to investigate it
now.
CFIUS is in talks with TikTok about measures it could take to
avoid divesting the Musical.ly assets it acquired, the sources said.
Details of those talks, referred to by CFIUS as mitigation, could not be
learned. The specific concerns that CFIUS has could also not be
learned.
The sources requested anonymity because CFIUS reviews are confidential.
"While we cannot comment on ongoing regulatory processes, TikTok has
made clear that we have no higher priority than earning the trust of
users and regulators in the US Part of that effort includes working with
Congress and we are committed to doing so," a TikTok spokesperson said.
ByteDance did not immediately reply to a request for comment.
"By
law, information filed with CFIUS may not be disclosed by CFIUS to the
public," said a spokeswoman for the US Treasury Department, which chairs
CFIUS. She added that Treasury "does not comment on information
relating to specific CFIUS cases, including whether or not certain
parties have filed notices for review."
Last week, US Senate
Minority Leader Chuck Schumer and Senator Tom Cotton asked for a
national security probe in a letter to Joseph Macguire, acting director
of national intelligence.
They said they were concerned about the video-sharing platform's
collection of user data, and whether China censors content seen by
US users. They also suggested TikTok could be targeted by foreign
influence campaigns.
On Friday, Schumer welcomed news of the probe
in an emailed statement, calling it a "validation of our concern that
apps like TikTok...may pose serious risks to millions of Americans and
deserve greater scrutiny."
TikTok allows users to create and share
short videos with special effects. The company has said U.S. user data
is stored in the United States, but the senators noted that ByteDance is
governed by Chinese laws.
TikTok also says China does not have jurisdiction over content of the
app, which does not operate in China and is not influenced by any
foreign government.
Last month, Musical.ly founder Alex Zhu, who
heads the TikTok team, started to report directly to ByteDance CEO Zhang
Yiming, one of the sources said. He previously reported to Zhang Nan,
the head of ByteDance's Douyin, a Chinese short video app. It was not
clear whether this move, which separates TikTok organisationally from
ByteDance's other holdings, was related to the company's discussions
with CFIUS over mitigation.
In October, US senator Marco Rubio
asked CFIUS to review ByteDance's acquisition of Musical.ly. He cited
questions about why TikTok had "only had a few videos of the Hong Kong
protests that have been dominating international headlines for months."
After the Reuters story of the CFIUS investigation appeared, Rubio
tweeted: "Any platform owned by a company in China which collects
massive amounts of data on Americans is a potential serious threat to
our country."
US Senator Josh Hawley said in a tweet that TikTok
should testify at a hearing scheduled next week about technology
companies putting consumer data at risk in China.
Facebook CEO
Mark Zuckerberg, whose product competes with TikTok particularly for
younger users, has also criticized the app over censorship concerns.
The
United States has been increasingly scrutinizing app developers over
the personal data they handle, especially if some of it involves U.S.
military or intelligence personnel.
Chinese gaming company Beijing
Kunlun Tech said in May it would seek to sell its popular gay dating
app Grindr after CFIUS approached it with national security concerns.
Last
year, CFIUS forced China's Ant Financial to scrap plans to buy
MoneyGram International Inc over concerns about the safety of data that
could identify US citizens.
The panel also compelled Oceanwide
Holdings and Genworth Financial to work through a U.S. third party data
administrator to ensure the Chinese company could not access the
insurer's U.S. customers' personal private data.
Bytedance's Rise
ByteDance
is one of China's fastest growing startups. It owns the country's
leading news aggregator, Jinri Toutiao, as well as TikTok, which has
attracted celebrities like Ariana Grande and Katy Perry.
ByteDance
counts Japanese technology giant SoftBank, venture firm Sequoia Capital
and big private-equity firms such as KKR, General Atlantic and
Hillhouse Capital Group as backers.
Analysts have called ByteDance
a strong threat to other Chinese tech industry firms including social
media and gaming giant Tencent Holdings and search engine leader
Baidu. Globally, ByteDance's apps have 1.5 billion monthly active users
and 700 million daily active users, the company said in July.
The
seven-year-old Chinese start-up posted a better-than-expected revenue
for the first half of 2019 at over $7 billion (roughly Rs. 49,493
crores), and was valued at $78 billion (roughly Rs. 5,51,499 crores)
late last year, sources have told Reuters.
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