According to the sources, the sale demand came from the Committee on Foreign Investment in the U.S. (Cfius), a government task force comprised of many agencies responsible for monitoring potential threats to national security posed by foreign investments.
TikTok officials have stated that worldwide investors hold 60% of ByteDance, employees own 20%, and the founders own 20%; nonetheless, the founders' shares have disproportionate voting rights, as is typical in the technology industry. It was established in Beijing in 2012 by Zhang Yiming, ByteDance's CEO Liang Rubo, and others.
In a statement released on Wednesday, TikTok stated that a mandatory sale would do little to mitigate the security concerns. Facebook has committed $1.5 billion to a program to protect user data and content in the United States against potential Chinese government access or influence.
"If defending national security is the purpose, divestment doesn't fix the problem: a change in ownership would not impose any additional limitations on data flows or access, " TikTok spokesperson Brooke Oberwetter said in a statement.
According to Ms. Oberwetter, "the best way to address concerns about national security is through the transparent, U.S.-based protection of U.S. user data and systems, with comprehensive third-party monitoring, vetting, and verification," which is exactly what they are doing.
Cfius is overseen by the Treasury Department, which declined to comment.
It has been reported by The Wall Street Journal that the negotiations with Cfius over a way to secure TikTok's data have been ongoing for over two years and have been at a stalemate for months, with representatives from the Pentagon and the Justice Department on the panel among those supporting a forced sale.
With its $1.5 billion security plan, TikTok believes it will effectively isolate its U.S. operations, keeping all data within the country. The plan also calls for granting Oracle Corp., a U.S. firm, access to the firm's algorithmic code in order to identify problems and report them to government auditors.
Opponents of the plan argue that it is insufficient because any company with Chinese ownership must yield to Beijing's demands if they are made.
U.S. future moves were unclear, and sources indicate a resolution could be months away. CEO Shou Zi Chew of TikTok will be testifying before the House Energy and Commerce Committee to answer lawmakers' questions about the company's security measures.
On the basis of identical national-security concerns, the Trump administration attempted to compel a sale of TikTok to U.S.-majority ownership in the year 2020. Nevertheless, when TikTok and ByteDance Ltd. challenged the intended ban in court, the initiative stalled. Businesses claimed the restriction would go against the Berman amendments, which prevent the president from using economic sanctions to deal with risks to national security.
The road ahead may be long and rocky for the Biden administration's action against TikTok. Since the Chinese government wouldn't allow the TikTok algorithm to be sold along with it, the company can argue that any forced sale would amount to a ban. It's possible that the firm may also argue that the change would be illegal under the First Amendment and the Berman amendment.
The timing of Cfius's action coincided with the introduction of a bill in the Senate that would give the government more legal leverage when confronting what it sees as a threat from foreign-owned apps.
The bill introduced by Senate Intelligence Committee Chairman Mark Warner (D-Va.) and Senate Republican Whip John Thune (R-S.D.) would mandate that the Commerce Department establish processes to mitigate hazards and potentially ban foreign technology.
Where appropriate, this could result in the suspension of access to a given service or platform. It didn't take long for members of the Biden administration to sign on to the bill.
National Security Adviser Jake Sullivan said in a statement that the legislation would give the United States government the ability to stop "certain foreign governments" from exploiting technology services operating in the United States in a way that endangers American citizens' personal information and national security.
Karine Jean-Pierre, the White House press secretary, recently declined to clarify whether or not Vice President Biden would prohibit TikTok if the law passed and gave him the right to do so. Nevertheless, she did recognize the White House had "concerns with this particular app."