Trump administration to review Oracle’s TikTok deal this week

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The Trump administration must review the “technical partnership” agreement between Oracle and ByteDance, the Chinese group that owns TikTok, before deciding whether or not to approve the deal.

The deal – which isn’t a full sale – comes as the video-sharing app has been caught in a growing tech war between Washington and Beijing.

After initially threatening a complete ban on TikTok, the popularity of which has skyrocketed in recent months, President Donald Trump said last month that he would allow a US company to buy TikTok’s US operations, setting a deadline to September 20.

He stressed that he wanted a payment to be made to the treasury as part of any deal, an unprecedented demand his administration was never able to explain.

However, two people familiar with the deal between US software group Oracle and ByteDance said the deal did not include any payments to the US Treasury. A senior U.S. official said there was no ongoing discussion about a payment, but the deal would bring economic benefits.

A person involved in the talks added that the two companies would invest heavily in the United States and create thousands of jobs.

The White House declined to comment on the lack of payment to the Treasury.

Steven Mnuchin, Secretary of the US Treasury, said the Foreign Investment Committee – a government interagency panel capable of blocking deals for national security reasons – will review the deal this week to see if it protects users’ private data. American app.

“We will review this in the Cfius committee this week and then make a recommendation to the chair,” Mnuchin told CNBC.

The US official said Cfius would not agree to a deal that did not include sufficient protections against national security risks. But he stressed that there were positive elements in the deal that would be welcomed by some of the more hawkish officials.

The person involved in the negotiations added that the deal, which could change following the Cfius review, included many safeguards to protect US user data, while allowing the Chinese group to retain key intellectual property rights.

Mr Mnuchin said the deal with Oracle would involve the creation of a US-based headquarters that would create 20,000 new jobs in the country.

Oracle, which was co-founded by Larry Ellison, a supporter of Mr. Trump who is also the largest shareholder in the company, confirmed it was “part of the proposal” that ByteDance presented to the Treasury over the weekend. The enterprise software group said it would “serve as a trusted technology provider.”

To satisfy Cfius, ByteDance plans to structure the transaction similar to the acquisition of US insurer Genworth by Chinese Oceanside, according to two people involved in the negotiations. Oceanside has agreed to use third-party companies owned and based in the United States to process sensitive data of Genworth policyholders.

In the case of TikTok, Oracle would be responsible for protecting the private data of US users by building a clear firewall between them and ByteDance, two of the people involved in the discussions said.

Several people briefed on the deal said such a plan could satisfy Cfius officials. But some warned that the situation was not comparable to any previous case.

“We have a president who is campaigning against China and any indication of giving in to Beijing on TikTok will be seen as a weakness,” said a person involved in the negotiations, who feared the deal would not be approved by the Trump administration. .

During the first three years of his administration, Mr. Trump showed little interest in national security issues related to China as he focused on trade talks with Beijing.

But he has sharply increased the pressure on China in recent months, blaming Beijing for the global spread of Covid-19 and taking a stronger stance on human rights violations and repression of the pro-democracy movement in Hong Kong. .

A senior Cfius lawyer warned that any deal with ByteDance that would allow the Chinese company to retain majority ownership of the app in the United States would be difficult for the administration to approve. But the lawyer added that “what could change that is the close relationship that Oracle has with Trump.”

Mr. Ellison, president of Oracle, is a rare Silicon Valley-based supporter and fundraiser for Mr. Trump, while the technology group’s chief executive, Safra Catz, was a member of Mr. Trump in 2016.

Microsoft had also been in talks to buy TikTok. But its efforts were failed by China’s introduction of technology export rules in August, which made it nearly impossible for the U.S. group to take control of the app’s algorithm, which is critical to its success, said a person with direct knowledge of the subject.

Oracle will likely hold a minority stake in the US company if the deal is approved. Existing investors in ByteDance are also expected to have a stake, said a person familiar with the discussions, who warned that the talks are continuing. Any deal would require the support of the US and Chinese governments.

Additional reporting by Miles Kruppa in San Francisco

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