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."

Protocol | China

Beijing meets an unstoppable force: Chinese parents and their children

Live-in tutors disguised as nannies, weekday online tutoring classes and adult gaming accounts for rent. Here's how citizens are finding ways to skirt Beijing's diktats.

Citizens in China are experienced at cooking up countermeasures when Beijing or governments come down with rigid policies.

Photo: Liu Ying/Xinhua via Getty Images

During the summer break, Beijing handed down a parade of new regulations designed to intervene in youth education and entertainment, including a strike against private tutoring, a campaign to "cleanse" the internet and a strict limit on online game playing time for children. But so far, these seemingly iron-clad rules have met their match, with students and their parents quickly finding workarounds.

Grassroots citizens in China are experienced at cooking up countermeasures when Beijing or governments come down with rigid policies. Authorities then have to play defense, amending holes in their initial rules.

Keep Reading Show less
Shen Lu

Shen Lu is a reporter with Protocol | China. Her writing has appeared in Foreign Policy, The New York Times and POLITICO, among other publications. She can be reached at shenlu@protocol.com.


Keep Reading Show less
Nasdaq
A technology company reimagining global capital markets and economies.
Protocol | Policy

Google and Microsoft are at it again, now over government software

The on-again, off-again battle between the two companies flared up again when Google commissioned a study on how much the U.S. government relies on Microsoft software.

Google and Microsoft are in a long-running feud that has once again flared up in recent months.

Photo: Jens Tandler/EyeEm/Getty Images

According to a new report commissioned by Google, Microsoft has an overwhelming "share in the U.S. government office productivity software market," potentially leading to security risks for local, state and federal governments.

The five-page document, released Tuesday by a trade group that counts Google as a member, represents the latest escalation between the two companies in a long-running feud that has once again flared up in recent months.

Keep Reading Show less
Ben Brody

Ben Brody (@ BenBrodyDC) is a senior reporter at Protocol focusing on how Congress, courts and agencies affect the online world we live in. He formerly covered tech policy and lobbying (including antitrust, Section 230 and privacy) at Bloomberg News, where he previously reported on the influence industry, government ethics and the 2016 presidential election. Before that, Ben covered business news at CNNMoney and AdAge, and all manner of stories in and around New York. He still loves appearing on the New York news radio he grew up with.

People

Facebook wants to kill the family iPad

Facebook has built the first portable smart display, and is introducing a new household mode that makes it easier to separate work from play.

Facebook's new Portal Go device will go on sale for $199 in October.

Photo: Facebook

Facebook is coming for the coffee table tablet: The company on Tuesday introduced a new portable version of its smart display called Portal Go, which promises to be a better communal device for video calls, media consumption and many of the other things families use iPads for.

Facebook also announced a revamped version of its Portal Pro device Tuesday, and introduced a new household mode to Portals that will make it easier to share these devices with everyone in a home without having to compromise on working-from-home habits. Taken together, these announcements show that there may be an opening for consumer electronics companies to meet this late-pandemic moment with new device categories.

Keep Reading Show less
Janko Roettgers

Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.

Protocol | Policy

The techlash is threatening human rights around the world

Some 48 countries introduced laws to regulate tech last year. But researchers say many of those laws are just attempts at censorship and surveillance.

In its latest report, Freedom House President Michael Abramowitz said, "We really see free expression and privacy as under unprecedented strain."

Christopher T. Fong/Protocol

Governments around the world are seizing on widespread frustrations with Big Tech as justification for a spate of increasingly restrictive laws governing online speech, a new report finds, a trend that researchers say puts both free expression and the fate of tech companies' overseas employees at risk.

Over the last year alone, some 48 countries worldwide introduced — and in some cases, passed — laws to regulate tech companies, according to the latest report by Freedom House, a nonprofit that publishes an annual survey on internet freedoms in 70 countries. While those laws have often been passed in the name of promoting competition, protecting people's data and moderating offensive content, the report's authors say that, in many cases, these laws are merely thinly veiled attempts to force companies into censorship and surveillance.

Keep Reading Show less
Issie Lapowsky

Issie Lapowsky ( @issielapowsky) is Protocol's chief correspondent, covering the intersection of technology, politics, and national affairs. She also oversees Protocol's fellowship program. Previously, she was a senior writer at Wired, where she covered the 2016 election and the Facebook beat in its aftermath. Prior to that, Issie worked as a staff writer for Inc. magazine, writing about small business and entrepreneurship. She has also worked as an on-air contributor for CBS News and taught a graduate-level course at New York University's Center for Publishing on how tech giants have affected publishing.

Latest Stories