Sep 17, 2020 - Technology

Scoop: How the Oracle-TikTok deal would work

Illustration of a Rorschach test made out of the TikTok logo.

Illustration: Aïda Amer/Axios

An agreement between TikTok's Chinese owner ByteDance and Oracle includes a variety of concessions in an effort to make the deal palatable to the Trump administration and security hawks in Congress, according to a source close to the companies.

Driving the news: The deal, in the form of a 20-page term sheet agreed to in principle by the companies, would give Oracle unprecedented access and control over user data as well as other measures designed to ensure that Americans' data is protected, according to the source.

Why it matters: President Trump and U.S. leaders have been calling for a complete sale of the business. While this isn't that, it does create several layers of oversight, including a continuous third-party audit and an independent board approved by the U.S. government.

Details: Among the provisions of the term sheet, per the source:

  • Oracle will have the exclusive ability to oversee all tech operations for TikTok in the U.S.
  • Oracle will review TikTok's source code and related software to ensure there are no backdoors.
  • Oracle will also be able to review all updates to TikTok's software to ensure no adverse changes are made.

TikTok in the U.S. will have its own board, approved by the U.S. government.

  • That board will include a security director — an independent data security expert with national security credentials, so likely a former NSA or CIA official with a high-level security clearance.
  • There will also be a security subcommittee of the board composed of U.S. citizens with the final say on matters related to security and data privacy. It will have veto power over board decisions that go against the company's security commitments.
  • That subcommittee will also be responsible for ensuring compliance with CFIUS and other U.S. agency demands.

A separate entity, TikTok Global, will have its own board and be based in the U.S. It’s that entity in which Oracle, as well as Walmart, will have an ownership stake.

  • TikTok Global will own TikTok's operations around the world, including the U.S. operation, which will have the extra security measures and its own governance.

Instagram co-founder Kevin Systrom is one executive who has been approached about the possibility of leading the new company, according to a report in the New York Times.

The big picture: U.S. security officials and policymakers have regularly asserted that TikTok's popular video-sharing platform poses a risk to U.S. security because the Chinese government could gain access to U.S. user data.

  • TikTok has always insisted that it stores U.S. data outside of the reach of Chinese authorities.
  • Last month President Trump said he would ban the app in the U.S. unless ByteDance agreed to sell it to a U.S. company by mid-September.
  • Last weekend, Microsoft, which had long been seen as the frontrunner to acquire TikTok, said that ByteDance had rejected its bid.
  • Oracle is close to the Trump administration and might be better placed to win approval for a deal, but Wednesday President Trump said that he was "not going to be happy" if the deal left ByteDance as majority owner.

Between the lines: While the deal does not constitute a full sale and likely leaves a substantial chunk of the company in Chinese hands, the source notes this is way more than any other tech company is doing or being asked to do.

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