TikTok could face U.S. ban if Chinese owners don't divest, company says

The Biden administration has demanded that TikTok's Chinese owners divest their stakes in the popular video app or face a possible U.S. ban, the company told Reuters on Wednesday.

The move, first reported by the Wall Street Journal, is the most dramatic in a series of recent steps by U.S. officials and legislators who have raised fears that TikTok's U.S. user data could be passed on to China's government. ByteDance-owned TikTok has more than 100 million U.S. users.

It is the first time under the administration of U.S. President Joe Biden that a potential ban on TikTok has been threatened. Biden's predecessor, Donald Trump, tried to ban TikTok in 2020 but was blocked by the courts.

TikTok spokesperson Brooke Oberwetter told Reuters that the company had recently heard from the U.S. Treasury-led Committee on Foreign Investment in the United States (CFIUS), which demanded that the Chinese owners of the app sell their shares, and said if they didn't, they would face a possible U.S. ban of the video app.

The Journal said 60 per cent of ByteDance shares are owned by global investors, 20 per cent by employees and 20 per cent by its founders.

Past divestment proposal

CFIUS, a powerful national security body in 2020 had unanimously recommended that ByteDance divest TikTok.

"If protecting national security is the objective, divestment doesn't solve the problem: a change in ownership would not impose any new restrictions on data flows or access," Tiktok's Oberwetter said in a statement.

The White House declined to comment.

TikTok Chief Executive Shou Zi Chew is due to appear before U.S. Congress next week. It's not clear if the Chinese government would approve any divestiture.

Any U.S. ban would face significant legal hurdles.

TikTok rejects spying allegations

TikTok and CFIUS have been negotiating for more than two years on data security requirements. The video app company said it has spent more than $1.5 billion US on rigorous data security efforts and rejects spying allegations.

TikTok said on Wednesday that "the best way to address concerns about national security is with the transparent, U.S.-based protection of U.S. user data and systems, with robust third-party monitoring, vetting, and verification."

Last week, the White House backed legislation by a dozen senators to give the administration new powers to ban TikTok and other foreign-based technologies if they pose national security threats.

It could give the Biden administration new ammunition in court if they sought to ban the app.

White House National Security Adviser Jake Sullivan praised the bipartisan bill, saying it "would strengthen our ability to address discrete risks posed by individual transactions, and systemic risks posed by certain classes of transactions involving countries of concern in sensitive technology sectors."

The U.S. House of Representatives Foreign Affairs Committee this month voted along party lines on a bill sponsored by Republican Representative Michael McCaul to give Biden the power to ban TikTok.