Exclusive: US opens national security investigation of TikTok – sources

NEW YORK / BEIJING / WASHINGTON (Reuters) – US Government Launches National Security Review of TikTok Owner Beijing ByteDance Technology Co.'s $ 1 Billion Acquisition on US Social Media App Musical.ly people who are familiar with the matter.

While the $ 1 billion acquisition was completed two years ago, In recent weeks, US lawmakers have been calling for a national security probe into TikTok, worried the Chinese company might censor politically sensitive content and question how it stores personal information.

TikTok has become more popular with American teenagers in a time of growing US-China tension over trade and technology transfer. Around 60% of TikTok's 26.5 million active users per month in the United States are between 16 and 24, the company said earlier this year.

The Foreign Investment Committee of the United States (CFIUS), which assesses foreign acquirers' agreements for potential national security risk, has begun reviewing the Musical.ly agreement, the sources said. TikTok did not seek approval from CFIUS when it acquired Musical.ly, they added, giving the US security panel the opportunity to investigate it now.

CFIUS is in talks with TikTok about measures it can take to avoid disposing of Musical.ly assets it acquired, the sources said. Details of these calls, referred by CFIUS for mitigation, could not be learned. The specific concerns of CFIUS also could not be learned.

The sources requested anonymity because CFIUS reviews are confidential.

"Although we cannot comment on ongoing regulatory processes, TikTok has made it clear that we have no higher priority than gaining the trust of users and regulators in the United States. Part of this effort includes working with Congress, and we are committed to to do so, "said a spokeswoman for TikTok. ByteDance did not immediately respond to a request for comment.

The U.S. Treasury Department, CFIUS leader, did not immediately respond to a request for comment.

U.S. Senate Minority Leader Chuck Schumer and Senator Tom Cotton on a national security probe, saying they were concerned about the video-sharing platform's collection of user data, and whether China was censoring content viewed by U.S. users, and also hinted that TikTok could be targeted by foreign influence campaigns. [19659004] "With over 110 million downloads in the United States alone, TikTok is a potential counterintelligence threat we cannot ignore," Sch wrote umer and Cotton to Joseph Macguire, acting director of national intelligence.

TikTok allows users to create and share short videos with special effects. The company has said that US user data is stored in the US, but the senators noted that ByteDance is governed by Chinese laws.

TikTok also states that China does not have jurisdiction over the content of the app, which does not operate in China and is not influenced by any foreign government.

Last month, Musical.ly founder Alex Zhu, who heads the TikTok team, began reporting directly to ByteDance CEO Zhang Yiming, one of the sources said. He previously reported to Zhang Nan, the boss of ByteDance's Douyin, a Chinese short-video app. It was not clear whether this move, which separates TikTok organizationally from ByteDance's other holdings, was related to the company's discussions with CFIUS on mitigation.

In October, US Senator Marco Rubio asked CFIUS to review ByteDance's acquisition of Musical.ly. He cited why TikTok "only had a few videos of the Hong Kong protests that have dominated international headlines for months."

Facebook CEO Mark Zuckerberg, whose product competes with TikTok specifically for younger users, also has criticized app for censorship.

The United States has increasingly scrutinized app developers for the security of personal information they handle, especially if any of it involves US military or intelligence personnel.

Chinese gaming company Beijing Kunlun Tech Co Ltd said in May that it would seek to sell its popular gay dating app Grindr after it was contacted by CFIUS for national security reasons.

Last year, CFIUS forced China's Ant Financial to scrap plans to buy MoneyGram International Inc over concerns about the security of data that could be used to identify US citizens.

The panel also forced Oceanwide Holdings and Genworth Financial Inc to work through a US third-party data administrator to ensure that the Chinese company could not access the insurers 'US customers' personal data.

BYTEDANCE & # 39; s RISE

ByteDance is one of China's fastest growing startups. It owns the country's leading news aggregator, Jinri Toutiao, as well as TikTok, which has attracted celebrities such as Ariana Grande and Katy Perry.

ByteDance counts Japanese technology giant SoftBank, venture firm Sequoia Capital and major private equity companies such as KKR, General Atlantic and Hillhouse Capital Group as backers.

Analysts have called ByteDance a strong threat to other Chinese technology companies, including social media and gaming giant Tencent Holdings Ltd and head of search engine Baidu Inc. Globally, ByteDance's apps have 1.5 billion active users each day and 700 million active users daily. the company said in July.

The seven-year-old Chinese startup had better-than-expected revenue for the first half of 2019 of more than $ 7 billion, and was valued at $ 78 billion late last year, sources told Reuters.