TikTok, Oracle seek Trump’s approval as clock ticks down

Oracle and TikTok are racing to win approval from the Trump administration before a Sunday deadline in a deal that would allow the wildly popular video app to continue operating in the U.S.

The broad contours of the deal, expected to be formally announced this week, would involve moving TikTok’s global headquarters to the U.S. while allowing Chinese parent company ByteDance to remain a majority shareholder, with Oracle taking a minority stake, the Financial Times reported Tuesday afternoon.

The previous day, Treasury Secretary Steven Mnuchin confirmed aspects of the pending agreement during an interview on CNBC’s “Squawk Box,” noting that the new headquarters could create up to 20,000 jobs.

Still, the deal is likely to raise concerns over how much control ByteDance is actually giving up, whether issues of disinformation and censorship on the app will be fully addressed, and how user data will be handled and secured under the restructuring.

It’s also expected to raise eyebrows given President Trump’s close ties with Oracle executives such as Larry Ellison, the tech giant’s co-founder and executive chairman, who hosted a fundraiser for the president earlier this year.

“We’re going to make a decision pretty soon,” Trump told reporters Tuesday. “I have a high respect for Larry Ellison. He’s somebody I know. He’s been really a terrific guy for a long time. We’re going to take a look. I heard they’re very close to a deal.”

Oracle CEO Safra Catz was part of Trump’s transition team in 2016 and was reportedly floated as a potential Cabinet member.

The company’s top Washington lobbyist, Ken Glueck, was also on Trump’s transition team.

Jordan Libowitz, communications director at Citizens for Responsibility and Ethics in Washington, said awarding a company that has publicly backed the president is part of a pattern with the Trump administration.

“Oracle actually seems like a pretty obvious pick in Trump World because of the support Larry Ellison has given President Trump,” Libowitz said.

Some Democratic lawmakers have raised similar concerns about the deal.

“I’m waiting to see all the details, but it’s hard to imagine this is anything but a payoff from China to one of Donald Trump’s major campaign fundraisers,” Sen. Ron Wyden (D-Ore.) said in a statement Tuesday afternoon. “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.”

The fast-moving developments come after Trump issued two executive orders last month taking aim at TikTok: one prohibiting U.S. companies from doing any transactions with parent company ByteDance and one compelling the divestiture of the Beijing-based entity’s U.S. operations. Both orders carried with them an implementation date of Sept. 20.

The president argued that TikTok’s ownership by a Chinese company posed unacceptable national security risks requiring executive action, based on a review by the interagency Committee on Foreign Investment in the United States (CFIUS).

It is unclear how the potential partnership between Oracle and TikTok will address those issues, particularly if ByteDance is allowed to maintain majority control, experts told The Hill.

“Having a technology partnership versus having control over the platform are two completely different things, so the concerns are still valid related to whether Oracle will have visibility into the algorithm, or will they be a steward of the platform in the United States,” said Mark Ostrowski, head of engineering at software group Check Point US East.

Under the outline of the deal, the app would still have Chinese ownership, as opposed to ByteDance fully divesting its American operations. That setup would spark data transfer concerns such as the ones outlined in the executive orders.

Sen. Josh Hawley (R-Mo.), normally an ardent backer of Trump, pointed out those concerns in his plea Monday night for CFIUS to reject the deal.

“China’s repressive intelligence laws, which allow the seizure of data from Chinese companies like ByteDance if the Chinese Communist Party comes knocking, still remain in force,” he wrote in a letter to Mnuchin. “And that is why any corporate shell game that leaves TikTok in the hands of ByteDance will simply perpetuate the original problem, leaving U.S. national interests and everyday users at serious risk.”

Overshadowing the deal is the potential for the Chinese government to pull the rug out from under negotiations.

Beijing last month updated its export controls list for the first time in more than a decade to include artificial intelligence technologies that likely include the TikTok algorithm, potentially giving Chinese officials the power to limit the algorithm’s use outside the country.

Microsoft, which until Sunday night appeared to be the leading candidate to acquire TikTok, hinted at issues with the algorithm in a statement after its bid was rejected by ByteDance.

“We would have made significant changes to ensure the service met the highest standards for security, privacy, online safety, and combating misinformation,” the company said. “We look forward to seeing how the service evolves in these important areas.”

A partnership rather than a true sale may have been preferred by ByteDance because it did not want Microsoft to take over the algorithm, according to Howard Yu, a professor at the Institute for Management Development in Switzerland.

“That could be a huge influence why TikTok chose not to partner with Microsoft. … They might fear the loss of either independence entirely,” he said.

One of Trump’s executive orders also raised concerns about TikTok being used to spread pro-Chinese Communist Party messaging and suppressing content about the government’s treatment of the Uighurs or its handling of the coronavirus. It is unclear how those issues would be resolved through a partnership with Oracle.

But Oracle could take some steps to address those concerns.

James Lewis, director of the Technology Policy Program at the Center for Strategic and International Studies in Washington, told The Hill that Oracle should create a “firewall” between TikTok and ByteDance and ensure there is no censorship of content, a move that could be made even more difficult by ByteDance’s continued involvement in TikTok.

He also argued that after months of lawmaker concerns over TikTok, Oracle would need to take steps to reassure the public.

“No. 1 is it’s still the same service, No. 2, but it’s a lot safer to use, and that’s what they need to say, and they need to say it credibly,” Lewis said.

Oracle has its own public relations issues, namely criticism over its data privacy practices.

TikTok’s American public policy head, Michael Beckerman, raised some of those concerns in a 2019 Fox News op-ed before joining the platform.

“While individuals expect a social media company to know about the information on their profiles, they likely have no idea that Experian, Oracle, or many other massive data brokers have their address, phone number, and a dossier of their probable medical ailments,” he wrote. “The practices of data brokers are hidden and in stark contrast to internet companies that allow users to delete their accounts whenever they want and control their privacy settings with just a few clicks.”