TikTok, known for quirky videos of people dancing and lip syncing, has dropped a lawsuit against the government as it seeks to avoid a geopolitical clash between the US and China.
The company on Monday voluntarily withdrew one of two legal challenges to an Aug. 6 executive order that would bar new downloads of TikTok in the US. The potential ban was pushed back by a week after President Donald Trump approved “in concept” a deal between TikTok, Oracle and Walmart designed to satisfy his administration’s national security concerns over the app. The parties now have until late Sunday to finalize an agreement.
Beijing-based ByteDance owns TikTok, sparking concerns the video app could be used by the Chinese government to spy on federal employees and other people in the US. TikTok says it would never turn over US user data to the Chinese government even if it were asked to do so. Roughly 100 million people use TikTok in the US.
The deal, however, isn’t the final chapter in the seemingly never-ending saga. There’re still lots of unanswered questions about the relationships that TikTok, Oracle and Walmart will have and 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 of 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 on Monday, 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 on Monday 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, the 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.
If a deal isn’t finalized by Sunday, does this mean new downloads of TikTok will be barred?
Not necessarily. TikTok haspending against the Trump administration to block the potential ban. A federal judge could issue an injunction to temporarily halt it.
Andrew Morse contributed to this article.