The United States Commerce Department said Thursday it wouldn’t enforce an order that would’ve effectively banned the US operations of TikTok later in the day, acknowledging the government would follow an injunction issued last month.
In a notice, the department cited a preliminary injunction issued last month by a federal district court in Pennsylvania against the Trump administration’s threatened shutdown of the Chinese-owned short-video app. The judge determined the proposed ban would hamper free speech, after three TikTok stars sued the government. The department said a ban wouldn’t go into effect “pending further legal developments.”
The statement came hours after a federal appeals court said TikTok and ByteDance, its Chinese owner, have until Dec. 14 to file documents to support their challenge of government actions forcing the sale of TikTok’s US operations. The companies had been in discussions with the Committee on Foreign Investment in the United States, which reviews foreign acquisitions for national security risks, about a deal but said they hadn’t received “substantive feedback.” The Treasury Department, which houses the CFIUS, says it has been clear with the company about the steps that are needed.
TikTok, popular among teens, lets you add music and effects to short videos.
The developments on Thursday follow a pair of executive orders signed by President Donald Trump in August that target the short-video app. The first order bars any US transactions with ByteDance because of concerns the data TikTok collects could “allow the Chinese Communist Party access to Americans’ personal and proprietary information.” In September, a federal judged granted TikTok’s request for a preliminary injunction against the order.
A second executive order, also issued in August, required ByteDance to sell its US operations by Nov. 12 and led to a potential deal with Oracle and Walmart , though that agreement is currently up in the air. Unanswered questions remain about the relationships that TikTok, Oracle and Walmart will have. There’s also confusion about ByteDance’s role in the arrangement.
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. It’s unclear if the company would get penalized if it doesn’t divest its US assets by Nov. 12. TikTok has asked for a 30-day extension. The Aug. 14 executive order gives the attorney general the authority “to take any steps necessary” to enforce the order.