TikTok’s parent company facing national security review, report says, Ars Technica

        

A week after members of Congressexpressed concernabout Chinese ownership of popular short-form video app TikTok, national security regulators are taking a closer look.

Regulators are indeed now reviewing TikTok for national security concerns,Reuters reports.

The review is being run by the Committee on Foreign Investment in the United States, or CFIUS, a formerly obscure interagency group. CFIUS, based out of the Treasury Department, comprises members from a dozen different agencies who review transactions in which an international business acquires a US business for national security concerns.

TikTok and its parent company, ByteDance, are in talks with CFIUS “about measures it could take to avoid divesting” the US assets it acquired, people familiar with the matter said. Reuters granted its sources anonymity, as CFIUS does not comment publicly on its investigations and is barred from disclosing certain information.

C-what-US?

CFIUS has seen its profile increase amid rising trade tensions and sharp rhetoric between the US and China during the Trump administration. The committee made nationwide headlines forblockingthe sale of US-based money-transfer company MoneyGram to China’s Ant Financial in early 2018.

The committee has also become more involved in high-tech transactions in recent years. It blocked the sale of a US semiconductor firm to a Chinese government-backed investment firmin 2017, and in 2018 it recommended against allowing Broadcom to acquire Qualcomm (a deal thatprobably wasn’t happeninganyway) a week before President Trumpsigned an executive orderblocking that deal on national security grounds.

CFIUS had its scope and mandate greatly expanded in 2018, when President Trump signed into law a “modernization” package that increased the committee’s finding and hiring authority, as well as expanding the types of transactions that were subject to significant scrutiny.

From Musical.ly to TikTok

The startup short-form video app Musical.ly launched in 2014 and quickly gained both popularity and funding in the years after. In 2016 and 2017, Musical.ly signed deals with Warner Music and Apple Music allowing users to integrate a broader library of tunes into their videos. A division of Beijing-based ByteDance snapped up Musical.ly for close to $ 1 billion in late 2017, then in 2018 sunset the Musical.ly name and product. Instead, ByteDanceintegratedits two extremely similar apps under the TikTok name.

CFIUS didnotreview the Musical.ly acquisition in 2017, meaning the committee has the authority retroactively to examine the transaction at this time.

Senators Tom Cotton (R-Ark.) And Chuck Schumer (DN.Y.) last week pushed the intelligence community to open a formal investigation into TikTok, saying, “TikTok’s terms of service and privacy policies describe how it collects data from its users and their devices, including user content and communications, IP address, location-related data, device identifiers, cookies, metadata, and other sensitive personal information. ” They add, “While the company has stated that TikTok does not operate in China and stores US user data in the US, ByteDance is still required to adhere to the laws of China.”

Earlier this year, Musical.ly reached a settlement with the Federal Trade Commission alleging it broke one of thefew privacy lawsthat actually exist in the United States: the Children’s Online Privacy Protection Act.

The company paid $ 5.7 million, at the time the largest civil penalty ever imposed by the FTC in a COPPA case, to settle claims that it knowingly harvested and used personal data from users under age 13 without obtaining parental consent.