Trump Insists on Compensation for U.S. in Any TikTok Sale

Trump Insists on Compensation for U.S. in Any TikTok Sale

(Bloomberg) — President Donald Trump said he’s told people involved in the sale of the U.S. assets of ByteDance Ltd.’s TikTok that the deal must be struck by Sept. 15 and the federal government must be “well compensated,” or the service will be shut down.

“I told them they have until Sept. 15 to make a deal — after that we close it up in this country,” Trump told reporters before boarding Air Force One for a trip to Kenosha, Wisconsin. “I said the United States has to be compensated, well compensated.”

It remains unclear how the U.S. would collect compensation from the sale of TikTok. The president said last month that the popular video streaming app’s U.S. operation had to be sold because its Chinese ownership makes it a national security threat.

TikTok has become a flashpoint for U.S. tensions with China. Trump has stepped up his attacks on the video app as his administration increases pressure on China ahead of the November presidential election. Then China on Friday imposed restrictions on the export of artificial intelligence technologies like speech and text recognition, throwing the potential sale into jeopardy. The restrictions will likely make it harder for ByteDance to get government approval for any deal.

“It’s difficult to tell now whether a deal will happen,” said Doug Barry, senior director of communications at the US-China Business Council. “Both countries want to dominate the key technologies of the future.”

Trump believes that the U.S. deserves compensation for resolving the national security threat posed by TikTok and the administration is looking at ways to extract a payment from any deal that’s struck, according to a person familiar with the matter. Another person said it’s unclear what Trump means when he refers to compensation in any deal, and that it would be the Treasury Department’s job to figure out how to make it work. Both people asked not to be named discussing non-public deliberations.

Microsoft Corp. has teamed up with Walmart Inc. to bid for TikTok’s U.S. assets and they’re vying against a competing offer from Oracle Corp.

White House staff have looked at collecting the money from compliance costs, according to one person familiar with the matter.

The U.S. assesses fees associated with deals under review by the Committee on Foreign Investment in the United States, or CFIUS, which investigates overseas acquisitions of U.S. businesses. But those charges — set on a sliding scale and no higher than $300,000 — appear to fall short of what Trump has demanded.

Microsoft declined to comment. The White House, TikTok and Oracle didn’t immediately respond to requests for comment.

Microsoft committed in a blog post to “providing proper economic benefits to the United States, including the United States Treasury.” But that language referred to ordinary tax revenue and job creation, according to a person familiar with the matter.

Now ByteDance founder Zhang Yiming is reconsidering his options and weighing the implications of Beijing’s involvement, according to people familiar with the matter. The company’s regulatory team and deal negotiators are huddling to discuss whether it’s still possible to craft a sale that can win approval from both governments, an acquirer, venture investors and ByteDance itself.

Trump has the authority under U.S. law to block foreign acquisitions of American businesses on national security grounds. The administration’s order requiring the TikTok sale stems from ByteDance’s 2017 acquisition of Musical.ly, which operated in the U.S. and was merged with TikTok.

Trump on Aug. 14 ordered ByteDance to sell TikTok in the U.S. within 90 days, citing risks to American national security. That followed an Aug. 6 order effectively banning the app in the U.S. within 45 days. TikTok has sued the administration to block the ban, arguing the move is unconstitutional and was driven by politics.

The order on the ban cited China’s access to data collected from the app, including location and browsing data. TikTok, a platform for creating and sharing short videos, has grown rapidly in the U.S. from about 11 million monthly active users in January 2018 to 100 million today, according to the company. Global usage has risen to almost 2 billion from 55 million in January 2018, it said.

“This data collection threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information — potentially allowing China to track the locations of Federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage,” the Aug. 6 order said.

(Updates with comment from US-China council in fifth paragraph)

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