TikTok Ban Averted: Trump Gives Oracle-Walmart Deal His 'Blessing'

Updated 12:55 a.m. ET

President Trump has given tentative approval to a deal that will keep TikTok alive in the U.S., resolving a months-long confrontation between a hit app popularized by lip-syncing teens and White House officials who viewed the service as a national security risk.

TikTok downloads were set to be banned in the U.S. starting at midnight Sunday, but that has now been averted.

"I have given the deal my blessing," Trump said. "I approve the deal in concept."

As part of the deal rescuing TikTok, U.S. tech company Oracle is joining hands with Walmart to form a new entity called TikTok Global, which will be headquartered in the United States.

That arrangement appears to satisfy the White House's concerns over the security of American user data, even though Chinese tech company ByteDance is expected to hold its majority-ownership position.

With the ties to ByteDance remaining, some experts in technology privacy are skeptical that the deal would meaningfully address the national security concerns that first launched Washington's scrutiny of TikTok.

"The interactions with the Chinese government, and the ability of the Chinese government to put pressure on the ByteDance company, is still substantial," said Chris Kelly, former chief privacy officer at Facebook.

"It won't be strange to have interaction between the two companies on a number of different issues, including algorithmic operations, so that could stretch into personal data pretty easily," Kelly said in an interview.

TikTok, which has some 100 million active monthly users in the U.S., is owned by Chinese tech giant ByteDance. For months, the Trump administration has been pushing TikTok to sever its ties to ByteDance. Officials in the White House and some Democrats in Washington fear China's authoritarian regime could access Americans' data through the app and use the information to blackmail or launch disinformation campaigns.

Under the new arrangement, Oracle will host all of TikTok's U.S. user data and will safeguard TikTok's computer systems "to ensure U.S. national security requirements are fully satisfied," TikTok said in a statement.

"While we strongly disagree with the implications of TikTok as a national security threat, we nonetheless understand the concerns," wrote Vanessa Pappas, interim head of TikTok, in a statement on Saturday. "We're pleased that today we've confirmed a proposal that resolves the Administration's security concerns and settles questions around TikTok's future in the US."

Analysts say Oracle's cloud computing business will receive a major boost as a result of the deal. Oracle has been lagging behind competitors, such as Amazon, Microsoft and Google, for cloud storage business. Oracle executives have close ties to Trump.

"We are a hundred percent 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," said Oracle CEO Safra Catz, who served on Trump's 2016 transition team.

Oracle Executive Chairman Larry Ellison is among the few tech leaders in Silicon Valley who supports the president. Back in February, Ellison hosted a fundraiser for Trump at his estate in Rancho Mirage, Calif., just south of Palm Springs.

Analysts said Walmart also stands to reap much benefit by tapping into a vast consumer base of mostly young people.

Besides being a major investor in the new TikTok company, Walmart said it will bring its e-commerce "retail capabilities" to the app, which could allow TikTok users to shop Walmart online through TikTok.

A major sticking point in the negotiations centered on how much of a stake Beijing-based ByteDance would have in TikTok's U.S. operation., as officials in Washington worried that any ByteDance ownership could give the Chinese company a backdoor to access Americans' data.

Oracle and Walmart are planning to own a combined 20% of the new TikTok entity, officials at TikTok said.

ByteDance is expected to own about 80% of the company, but since 40% of ByteDance is owned by U.S. investors, TikTok Global says it is majority owned by American investors, according to a person familiar with the deal.

Still, ByteDance owning 80% of TikTok would not appear to satisfy the recommendation of the Committee on Foreign Investment in the United States, known as CFIUS, a panel led by the Treasury that examines U.S. business transactions with ties overseas.

Trump signed an order in August requiring ByteDance to completely divest from its U.S. TikTok operations by Nov. 12. The fate of that order is murky.

"They're really moving the goal posts here," said a former CFIUS official, who asked not to be named for fear of retaliation from the administration. "ByteDance is still the biggest dog in this deal. The foreign control issue does not go away."

Four out of the five members of TikTok Global's board of directors will be Americans, according to a joint statement from Oracle and Walmart. Among the four U.S. board members is Walmart CEO Doug McMillon.

Oracle and Walmart officials say that TikTok Global will create more than 25,000 new jobs and pay $5 billion in taxes to the Treasury, though specifics were not provided, such as over what period those taxes were expected to be paid.

In addition, TikTok Global said it will develop an educational curriculum driven by artificial intelligence to teach children basic reading, history and other subjects. It comes just days after Trump said he is creating a commission to promote "patriotic education" to counter the teaching of American slavery and racism in classrooms.

Treasury officials say the deal still needs to be finalized by Oracle and Walmart. CFIUS will also have to sign off on the agreement.

TikTok plans to raise money ahead of a planned initial public offering on the stock market in less than a year.

Copyright 2020 NPR. To see more, visit https://www.npr.org.