TikTok Ban Possible if Chinese Owners Refuse to Sell Stake, Biden Administration Warns

The Biden administration has demanded that TikTok's Chinese owners divest their stakes in the popular video app or face a possible U.S. ban, the company told Reuters on Wednesday.

The move, first reported by the Wall Street Journal, is the most dramatic in a series of recent steps by US officials and legislators who have raised fears that TikTok's US user data could be passed on to China's government. ByteDance-owned TikTok has more than 100 million US users.

It is the first time under the administration of US Democratic President Joe Biden that a potential ban on TikTok has been threatened. Biden's predecessor, Republican Donald Trump, had tried to ban TikTok in 2020 but was blocked by the courts.

TikTok spokesperson Brooke Oberwetter told Reuters that the company had recently heard from the US Treasury-led Committee on Foreign Investment in the United States (CFIUS), which demanded that the Chinese owners of the app sell their shares, and said otherwise they would face a possible US ban of the video app.

The Journal said 60 percent of ByteDance shares are owned by global investors, 20 percent by employees and 20 percent by its founders.

CFIUS, a powerful national security body in 2020 had unanimously recommended that ByteDance divest TikTok.

"If protecting national security is the objective, divestment doesn't solve the problem: a change in ownership would not impose any new restrictions on data flows or access," Tiktok's Oberwetter said in a statement.

The White House declined to comment.

TikTok Chief Executive Shou Zi Chew is due to appear before the US Congress next week. It's not clear if the Chinese government would approve any divestiture.

Any US ban would face significant legal hurdles.

TikTok and CFIUS have been negotiating for more than two years on data security requirements. TikTok said it has spent more than $1.5 billion (roughly Rs. 12,400 crore) on rigorous data security efforts and rejects spying allegations.

TikTok said on Wednesday that "the best way to address concerns about national security is with the transparent, US-based protection of US user data and systems, with robust third-party monitoring, vetting, and verification."

Last week, the White House backed legislation by a dozen senators to give the administration new powers to ban TikTok and other foreign-based technologies if they pose national security threats. It could give the Biden administration new ammunition in court if they sought to ban TikTok.

White House national security adviser Jake Sullivan praised the bipartisan bill, saying it "would strengthen our ability to address discrete risks posed by individual transactions, and systemic risks posed by certain classes of transactions involving countries of concern in sensitive technology sectors."

The House of Representatives Foreign Affairs Committee this month voted along party lines on a bill sponsored by Republican Representative Michael McCaul to give Biden the power to ban TikTok.

© Thomson Reuters 2023