Sep 18, 2020
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About this Deal
The Commerce Department announced Friday morning that it would ban U.S. business transactions with China-owned social apps WeChat and TikTok on Sunday.
The Commerce Department statement sets up two different time frames for WeChat and TikTok, with a full ban on WeChat going into effect Sunday along with a ban on updates and maintenance to the TikTok app.
TikTok has a Nov. 12 deadline before companies are banned from providing cloud and internet services for the app, which could give Oracle more time to hammer out its offer for TikTok to satisfy President Donald Trump.
The Commerce Department announced Friday morning that it will ban U.S. business transactions with Chinese-owned social apps WeChat and TikTok on Sunday.
The announcement comes ahead of an expected statement Friday by President Donald Trump on whether or not the government will approve a deal for Oracle to take a minority stake in TikTok and become a “trusted technology partner” for the company in the U.S.
It’s unclear if the Commerce Department’s announcement means there’s no possibility of a deal going through before the Sunday deadline, and it could be an aggressive move from the Trump Administration to push for its original intention for TikTok to be fully owned by a U.S. company.
“At the President’s direction, we have taken significant action to combat China’s malicious collection of American citizens’ personal data, while promoting our national values, democratic rules-based norms, and aggressive enforcement of U.S. laws and regulations.” Commerce Secretary Wilbur Ross said in a statement Friday.
Friday’s announcement from the Commerce Department is an enforcement of Trump’s original executive order from August 6 that gave TikTok 45 days to sell its U.S. business to a U.S. company or face a ban in the U.S. WeChat, which is one of the most popular social messaging apps in the world, is owned by the Chinese company Tencent. TikTok’s parent company is the Chinese company ByteDance. Trump’s executive order cited national security concerns over the Chinese government’s access to user data in those apps to justify the potential ban.
The Commerce Department’s statement on Friday said that starting Sept. 20, U.S. companies will be banned from distributing WeChat and TikTok, meaning the two major mobile app stores run by Apple and Google would have to remove the apps from their libraries. The statement also blocks U.S. companies from providing services through WeChat “for the purpose of transferring funds or processing payments within the U.S.”
But the Commerce Department’s announcement also lays out a separate time frame specific to TikTok, which takes affect on Nov. 12. The rules that start Nov. 12 include provisions that block U.S. companies from providing internet hosting and services for TikTok. This could be directed at the deal being negotiated between TikTok and Oracle, which would provide cloud services for TikTok if Trump approves, and could give TikTok and Oracle more time to hammer out a deal that will satisfy the president.
In an interview with Fox Business on Friday, Ross said the bans will affect TikTok and WeChat differently at first. He said TikTok will still function if it’s already installed on a device, but users will not be able to upgrade the app. It’s still unclear what kind of functionality WeChat will have in the U.S. after Sept. 20, and it’s unclear whether or not TikTok will still be allowed in mobile app stores, but not allowed to provide updates to users.
“It’s not doing the same thing to TikTok as to WeChat,” Ross said on Fox Business. ”...As to TikTok, it’s just upgrades, maintenance things like that, that would be shut down at this stage. The real shutdown would come after November 12 in the event that there is not another transaction. So it’s very different how the way the two are being handled.”
WeChat is a popular marketing and sales tool for U.S. companies primarily in China, but around the world as well. With U.S. social apps like Facebook and Instagram banned in China, WeChat is the primary app people use for social networking and e-commerce. It’s also a popular app used by people in the U.S. to communicate with people in China, since U.S. apps are banned in China.
Representatives for Tencent, TikTok, WeChat, Apple and Google were not immediately available to comment.
How the TikTok deal changed
Since Trump’s August 6 executive order, there has been a mad dash to complete a deal to sell TikTok’s businesses in U.S., Australia and New Zealand to a U.S. company before the Sept. 20 ban deadline. Microsoft was widely believed to be the top contender to win the deal, and eventually partnered with Walmart on its bid. Oracle was also a top bidder.
But just days before TikTok intended to announce it had selected a buyer, China updated its technology export rules to include artificial intelligence algorithms like TikTok uses. That meant that ByteDance would need a license from China before it could sell TikTok to a U.S. company.
Since then, deal negotiations evolved from a full sale of TikTok’s U.S. business to selling a minority stake in the company to a U.S. firm that would host the app’s data. Microsoft announced Sunday night that it was backing out of a potential deal, and Oracle confirmed on Monday that its offer would make it a “trusted technology partner” for TikTok.
According to people familiar with the situation, Walmart is still involved with the deal, and has joined Oracle’s bid. Oracle would get less than a 20% stake in the company based on its current bid. TikTok has indicated that it would also go public on U.S. markets in about a year, although that’s not part of the formal deal.