TikTok’s parent, Chinese company ByteDance, is now facing a national security review over its 2017 acquisition of rival video-sharing app Musical.ly, according to Reuters.
The acquisition was significant because TikTok later absorbed Musical.ly’s 60 million US users, propelling its popularity in the US market even further. Now the merger is facing scrutiny from the Committee on Foreign Investment in the United States (CFIUS), which has the power to demand ByteDance reverse the deal.
CFIUS reviews generally operate in secret. But according to Reuters, TikTok is already in talks with the committee over what measures it can take to avoid divesting the Musical.ly assets from its business.
“By law, information filed with CFIUS may not be disclosed by CFIUS to the public,” the Treasury Department said in a statement. “Accordingly, the Department does not comment on information relating to specific CFIUS cases, including whether or not certain parties have filed notices for review”
Earlier this year, CFIUS demanded that Chinese company Beijing Kunlun Tech relinquish control of gay dating app Grindr, which it acquired in 2018. The key concern was over the potential risk of the Chinese government demanding access to Grindr’s user data to blackmail or influence US officials. In response, Kunlun Tech in May said it had agreed to sell Grindr.
ByteDance’s acquisition of Musical.ly originally occurred without review from CFIUS. But earlier this month, US Sen. Marco Rubio called on the government committee to examine the deal over allegations that TikTok is imposing Chinese censorship standards on US users.
“The Chinese government’s nefarious efforts to censor information inside free societies around the world cannot be accepted and pose serious long-term challenges to the US and our allies,” Rubio said at the time.
Last week, US Sens. Tom Cotton (R-Arkansas) and Chuck Schumer (D-New York) also called for the US intelligence community to examine the national security implications of TikTok collecting the personal data on millions of US users.
TikTok didn’t immediately respond to a request for comment. But the app has denied it’s a security threat. “We store all TikTok US user data in the United States, with backup redundancy in Singapore. Our data centers are located entirely outside of China, and none of our data is subject to Chinese law,” the company said in a post last week.
“Second, in regards to content concerns. Let us be very clear: TikTok does not remove content based on sensitivities related to China,” the company added.
Musical.ly was originally headquartered in Shanghai. However, the company had incorporated a US subsidiary office in Santa Monica, California, before its acquisition with ByteDance. This gives CFIUS the jurisdiction to review the merger.