Caixin
Nov 04, 2019 08:24 PM
BUSINESS & TECH

U.S. Government Probing TikTok for National Security Risks: Reports

Bytedance paid almost $1 billion yuan for Shanghai and California-based Musical.ly, which it merged into its own short video app TikTok. Photo: IC Photo
Bytedance paid almost $1 billion yuan for Shanghai and California-based Musical.ly, which it merged into its own short video app TikTok. Photo: IC Photo

The U.S. government has launched a national security probe into Chinese tech unicorn Bytedance’s 2-year-old acquisition of a popular American lip-sync video app.

Bytedance, which CB Insights values at $75 billion, paid almost $1 billion yuan for Shanghai and California-based Musical.ly and merged it into its own social short video app TikTok.

The acquisition was seen as a way for the Chinese company to gain a foothold in overseas markets and capitalize on an increasing appetite for short video.

Musical.ly, a platform launched in August 2014, allowed users to create and share 15-second lip-sync music videos and interact with their friends and fans. In both its earlier and current form as TikTok it has spawned a new generation of U.S. web celebrities.

Now the powerful Committee on Foreign Investment in the United States (CFIUS) has launched a national security review of the acquisition amid increasing concern about TikTok’s growing global influence, Reuters reported last week.

CFIUS, a cross-department committee led by the U.S. Treasury Department, reviews deals by foreign companies for potential national security risks, but is not required to disclose such investigations. The body did not respond to a request for comment.

Last month, two key senators from opposite sides of the political aisle wrote to the acting U.S. national intelligence director Joseph Maguire calling for him to examine the Chinese-owned app.

“TikTok is a potential counterintelligence threat we cannot ignore,” Republican Senator Tom Cotton and Senate Minority Leader Chuck Schumer said in the letter.

The growing popularity of TikTok, which has now been downloaded more than 110 million times in the U.S., has created concerns about the company’s use of user data, potential content restrictions and possible foreign influence in U.S political campaigns, they said.

Schumer and Cotton warned that China may compel TikTok to turn over the data it collects, which includes “user content and communications, IP address, location-related data, device identifiers, cookies, metadata, and other sensitive personal information.”

Republican Senator Marco Rubio wrote to CFIUS earlier in October asking for a national security investigation into ByteDance, saying the popular video app it owns had largely removed video content related to the ongoing protests in Hong Kong.

Following the news on Friday, Rubio said on Twitter that “any platform owned by a company in China ‬which collects massive amounts of data on Americans is a potential serious threat to our country.”‬‬‬‬

A TikTok representative in the U.S. said in a statement that while the company “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 U.S. Part of that effort includes working with Congress and we are committed to doing so.”

Bytedance has also scaled up its lobbying efforts in the U.S. in response to growing regulatory concerns. The company hired local firm Covington & Burling and spent about $120,000 in the third quarter alone on lobbying Washington, a marked increase from the $5,000 it spent in each of the previous two quarters of 2019, according to lobbying data publically available in the U.S.

TikTok is a somewhat rare example of a Chinese social media platform achieving success outside the bounds of the country. It is mostly known for lighthearted content — including lip syncing and dancing — uploaded by a mostly teenage user base. The app’s growth showed signs of waning in the third quarter of the year, with global user-downloads falling 4% from a year earlier.

Developed as the international version of Chinese short video app Douyin, Tiktok has been installed by around 564 million users so far this year and 1.45 billion times since it launched, potentially challenging the global dominance of U.S. platforms such as Facebook and Instagram. New U.S. users grew 11% to 3 million in July, according to Sensor Tower, up from 2.7 million a year earlier.

With additional reporting by Bloomberg

Contact reporter Isabelle Li (liyi@caixin.com)

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