TikTok-Oracle deal and a potential US ban: Everything you need to know

 TikTok-Oracle deal and a potential US ban: Everything you need to know

A federal judge has postponed the Trump administration’s threatened shutdown of TikTok in the US, finding a ban against the popular Chinese-owned app hampers free speech.

District Judge Wendy Beetlestone on Friday granted a preliminary injunction in a lawsuit challenging Trump’s order brought by a Pennsylvania comedian and two other TikTok creators.  She also noted their concerns over their income and career opportunities.

The ban, she said, would “have the effect of shutting down, within the United States, a platform for expressive activity used by approximately 700 million individuals globally.”

President Donald Trump signed an executive order in August that bars any US transactions with TikTok’s Chinese parent company, ByteDance, saying the data TikTok collects “threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information.” The data could allow China to track the location of federal employees and contractors, the executive order said. In September, a federal judged granted TikTok’s request for a preliminary injunction against the order.

A separate executive order, issued later in August, ordered ByteDance to sell its US operations by Nov. 12, leading to a potential deal with Oracle and Walmart, which is currently up in the air.

The proposed deal is still being reviewed and there are still lots of unanswered questions about the relationships that TikTok, Oracle, and Walmart will have. There’s also a lot of confusion about what role ByteDance plays in the arrangement.

Here’s what you need to know:

What’s in the deal between TikTok, Oracle, and Walmart?

Oracle and Walmart would get a combined 20% stake in a new company called TikTok Global, which is expected to go public in the next year. Four of the five members on TikTok Global’s board of directors will be American.

Oracle will host all US user data on its cloud platform and be tasked with “securing associated computer systems,” TikTok said in a statement.

“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,” Oracle CEO Safra Catz said in a statement.

TikTok Global also plans to create 25,000 US jobs as part of an expansion of its global headquarters, which will remain in the US. TikTok Global will pay more than $5 billion in new tax dollars to the US Treasury, according to Walmart. It will also create an educational program to “develop and deliver an AI-driven online video curriculum” that includes courses in math, reading, science, history, and computer engineering for children.

Does that mean ByteDance owns 80% of TikTok Global?

There’s confusion over how big a role ByteDance would play in TikTok Global. ByteDance says that it will have an 80% stake in TikTok Global before the new company goes public.

But Ken Glueck, Oracle executive vice president, said in a statement that “upon creation of TikTok Global, Oracle/Walmart will make their investment and the TikTok Global shares will be distributed to their owners, Americans will be the majority and ByteDance will have no ownership in TikTok Global.”

A person familiar with the deal told The Wall Street Journal that ByteDance wouldn’t technically be an owner of TikTok Global because the shares would be given to ByteDance investors. About 40% of ByteDance is owned by US venture capital firms.

Meanwhile, a group of Republican US lawmakers has urged Trump to reject the deal if ByteDance still has control over TikTok’s US operations, data and algorithms. Trump has signaled that he wouldn’t approve a deal if Walmart and Oracle didn’t have most of the control over TikTok Global.

“They are going to own the controlling interest. Everything is going to be moved into a cloud done by Oracle … and it’s going to be totally controlled by Oracle,” he told Fox News. “If we find that they don’t have total control, then we’re not going to approve the deal.”

Why does Walmart want a stake in TikTok?

TikTok has been experimenting with e-commerce features. Last year, the company started allowing some users to add links to e-commerce sites so people can buy products that are shown in videos.

Walmart said it will “bring its omnichannel retail capabilities including its Walmart.com assortment, eCommerce marketplace, fulfillment, payment and measurement-as-a-service advertising service” to TikTok.

Does the Chinese government approve of the TikTok-Oracle deal?

China reportedly objected to a forced sale of TikTok’s US operations but the current deal structure isn’t a full divestment. Still, there are signs that Beijing isn’t fully comfortable with the proposal.

“Based on what I know, Beijing won’t approve current agreement between ByteDance, TikTok’s parent company, and Oracle, Walmart, because the agreement would endanger China’s national security, interests and dignity,” tweeted Hu Xijin, editor-in-chief of the Global Times. The tabloid is backed by China’s Communist Party.

In August, China issued new restrictions on artificial intelligence technology exports, a move that delayed the TikTok deal. Under the current proposal, ByteDance won’t be transferring its algorithm and technology to Oracle, which might satisfy Chinese regulators.

What comes next?

The legal battle is hardly over. TikTok has another lawsuit pending against the Trump administration to block the potential ban. A federal judge could issue an injunction to temporarily halt it.

Malika Harkati

https://itfornet.com

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