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Power

Trump, TikTok, Oracle and Walmart reach a deal — that leaves ByteDance with lots of power

President Trump has approved a plan for Oracle to process TikTok's U.S. data and take a minority stake in the company. But the announcement was short on details about ByteDance.

Trump, TikTok, Oracle and Walmart reach a deal — that leaves ByteDance with lots of power

The deal, which is still awaiting official government approval, follows weeks of negotiations about TikTok's fate in the U.S.

Photo: Solen Feyissa/Unsplash

TikTok, Oracle and Walmart announced Saturday that they've reached a deal that will enable TikTok to continue operating in the U.S. and thwart a ban on new TikTok downloads in the U.S. that was set to take effect Sunday night. President Trump signaled his approval for the deal on Saturday, though it is still pending official approval by the U.S. and Chinese governments. Under the agreement, Oracle and Walmart will take minority stakes in TikTok, with Oracle processing TikTok's U.S. data.

"We are 100% confident in our ability to deliver a highly secure environment to TikTok and ensure data privacy to TikTok's American users and users throughout the world," Oracle CEO Safra Catz said in a statement announcing the deal. "This greatly improved security and guaranteed privacy will enable the continued rapid growth of the TikTok user community to benefit all stakeholders."

The news follows weeks of negotiations over how the company could satisfy President Trump's August executive order, which prohibited any transactions with TikTok's Chinese parent company, ByteDance, after Sept. 20. That order led to speculation, including from the president himself, that TikTok would have to be sold or else risk being shut down. The Commerce Department on Friday said Apple and Google would have to remove the app from their stores over the weekend and that TikTok would face a more stringent ban by Nov. 12 if its national security concerns were not resolved. On Saturday, Secretary of Commerce Wilbur Ross confirmed that the administration would delay the impending ban "in light of recent positive developments."

As part of the deal, TikTok committed to expanding its U.S. headquarters and adding 25,000 jobs in the country. It's also working on a "commercial partnership" with Walmart. Walmart said that while "there is still work to do on final agreements," it has agreed to purchase 7.5% of TikTok Global and provide ecommerce and payments services to the app.

TikTok said both Walmart and Oracle would take part in a pre-IPO round of financing, through which they could take a "20% cumulative stake" in the company." "Our team works tirelessly to provide a safe and inclusive platform and we're thrilled that we will be able to continue serving our amazingly diverse and creative community," the company wrote in a statement.

What about ByteDance?

The buzzer beater announcement was short on details about the exact role that ByteDance will play going forward, but it appeared to fall short of President Trump's initial demands that ByteDance give up majority control of the company. During a Wednesday press conference, President Trump himself said that he was "not going to be happy" if ByteDance retained majority control of TikTok under the deal. But by Saturday, he seemed to have reversed course, saying the deal had his blessing. "You have the combination of the Walmart, that's obvious, and the high tech of Oracle, and the genius of the two leaders of those companies, OK?" Trump said.

Trump also said he asked Oracle to create a $5 billion education fund to "educate people as to the real history of our country … not the fake history." Oracle, TikTok and the White House did not immediately respond to a request for comment about that fund. Neither company's statement mentioned it.

Though the president has reviewed the deal, Treasury Department spokesperson Monica Crowley said it's not yet finalized. "Approval of the transaction is subject to a closing with Oracle and Walmart and necessary documentation and conditions to be approved by [the Council on Foreign Investment in the U.S.]," Crowley said in a statement.

The president's original order centered on the security risks of allowing a Chinese-owned company to collect data on TikTok's 100 million users across the US. Unless the company was sold off, Trump's order said, TikTok would never really be free of Beijing's control. Now, some argue, it still won't. "An ongoing 'partnership' that allows for anything other than the full emancipation of the TikTok software from potential Chinese Communist Party control is completely unacceptable, and flatly inconsistent with the president's Executive Order of Aug. 6," Republican Sen. Josh Hawley of Missouri wrote in a letter to Treasury Secretary Steve Mnuchin last week.

Others went so far as to question whether the arrangement was, in fact, a sweetheart deal for Oracle, whose founder, Larry Ellison, is among President Trump's biggest fundraisers. "It's hard to imagine this is anything but a payoff from China to one of Donald Trump's major campaign fundraisers," Democratic Sen. Ron Wyden of Oregon said in a statement following initial reporting on the deal. "Making Oracle a middleman won't protect Americans against Chinese government influence, and to make matters worse, Oracle has an awful record of harvesting and selling Americans' private data to anyone with a credit card."

Ellison in a statement on Saturday said TikTok picked Oracle's Generation 2 cloud infrastructure "because it's much faster, more reliable and more secure than the first-generation technology currently offered by all the other major cloud providers."

Walmart has signaled its interest in TikTok for weeks, noting that having a stake in the platform could help with the retail giant's advertising ambitions. TikTok's interim head Vanessa Pappas has also said she sees "synergies" with Walmart. "For us, we've been really focused recently on rolling out some ecommerce features. We've been providing that for our creator community as another way for them to earn a livelihood," Pappas told CNBC in late August.

More than meets the eye

There's likely more to the deal than the public will ever see. When reviewing a foreign investment, the Council on Foreign Investment in the U.S., or CFIUS, regularly works out what are known as mitigation agreements, which can include requiring companies to hire third-party monitors from firms like Deloitte or submit to regular audits. The specifics of those agreements rarely see the light of day, but if CFIUS approves a controversial deal, experts say you can bet it's put some oversight mechanism in place. "I think you could put your money on that," said one lawyer who has helped negotiate these deals in the past, but asked for anonymity because of the political nature of the TikTok arrangement. "Whether the mitigation is going to be satisfactory for national security, we will never know."

The precise nature of the government's national security concerns has never been clearly articulated. The executive order itself makes reference to TikTok's data collection practices and to reporting that suggests it has censored content to satisfy the Chinese government, but TikTok has argued, including in a recent lawsuit against the Trump administration, that those assertions are either speculative or outdated.

National security experts, however, have said that while the politicization of the process complicates matters, there are legitimate causes for concern when it comes to TikTok's China ties. "We need to separate politics from national security concerns and from any harm that can be done to consumers," said Ashkhen Kazaryan, director of civil liberties with TechFreedom. Kazaryan said she has long been uneasy about the amount of data TikTok collects and how it could end up in the hands of the Chinese government, and hopes CFIUS tackled those questions during its investigation.

All the baggage

The new partnership means that Oracle will be inheriting plenty of TikTok's baggage beyond its ties to China. TikTok's rise has been rapid: It's amassed 100 million monthly active users in the U.S. in less than two years. As a result, it's still struggling to catch up with its own colossal growth. TikTok is still developing the basic infrastructure to handle the challenges related to speech, safety, copyright law and other issues that all popular social media networks eventually have to face.

Last year, the Federal Trade Commission fined the app $5.7 million for violating children's online privacy laws. In May, a group of children's privacy advocates filed a new complaint alleging TikTok is violating the terms of that 2019 settlement with the FTC and the Children's Online Privacy Protection Act. "It's not like that [2019] consent decree gets wiped off the books," said Josh Golin, the executive director of the Campaign for a Commercial Free Childhood, which led the latest complaint to the FTC. "They have a duty to stop processing the data of all people under 13."

And in July, following a tense, monthslong standoff, TikTok announced a partnership with the National Music Publishers Association, the trade group for thousands of music publishers and songwriters that had threatened to sue TikTok for copyright violations. "We expect our licensing deal to remain intact and available as TikTok must continue to pay the songwriters who make its product so popular," NMPA President and CEO David Israelite said in a statement to Protocol.

There are still many unknowns around what Oracle's work with TikTok will look like and how the companies will resolve the regulatory fears about the app. What is known is that the president's very public involvement in the negotiation has been peculiar and, according to Eric Goldman co-director of the High Tech Law Institute at Santa Clara University School of Law, could provoke a retaliation from China. "The U.S. government has weighed in at every step along the way," Goldman said. "To devalue the assets, to raise barriers to completing the transaction and to signal to China that it's OK to do that to American companies as well."

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