Oracle has secured approval for the deal to become a trusted technology provider for the embattled Chinese video app, TikTok.
The bidding for the purchase of TikTok’s US operations involving Microsoft, Walmart and Oracle came to an end on Sunday, after Microsoft acknowledged in a statement that ByteDance has rejected its bid, and Oracle confirmed it has struck a deal with the short video company.
The development caused a twist in the existing situation between White House and the Chinese technology. Donald Trump had said earlier he wanted a total sale of TikTok’s US operations and wouldn’t condone anything less. The ByteDance deal with Oracle means it will become a “trusted security provider” not a purchaser of the video app, and Washington seems to be in agreement with the new deal even though it clearly goes against Trump’s executive order.
China has been kicking against forced sale of TikTok’s US operations. Last week, Beijing reviewed its technology export laws to require a government’s license for a deal such as the sale of TikTok, in an attempt to stall the sale.
The US appears to be reneging on its earlier stand on the matter, bowing to pressure from China and tech industry players who have vocally condemned the move to ban TikTok from the beginning, saying it will set a very negative trajectory.
China on the other hand would prefer closing TikTok down in the US to a ‘forced sale’ that would involve transferring its algorithm and artificial intelligence technology to a foreign buyer.
The twist in the plot is said to have come from Oracle’s personal relationship with the White House. CNBC noted that Oracle’s leadership has maintained a close relationship with the Trump’s administration, with the CEO Safra Catz previously taking part in Trump’s transition team and Chairman Larry Ellison hosting a fundraiser for Trump’s reelection campaign earlier this year.
Trump’s attack on TikTok has been based on national security concerns, as the US government is worried that the app may be harvesting private data of American users, and will not hesitate to share it with Beijing at request.
TikTok had tenaciously dismissed the possibility of sharing users’ private information with Beijing. In a bid to avoid a divestment of its US operations, the parent company, ByteDance said it would explore other options, part of it is to lobby the US government to change its position from ‘forced sale’ to partnership.
That appears to be the reason Oracle was chosen over Microsoft, to use its personal relationship with Washington to get TikTok a “no sale” deal. Oracle said the “trusted technology provider” was part of a proposal submitted by ByteDance to the US Treasury Department over the weekend.
But while the deal must have saved the United States a new phase of spat with China, it is causing division within Washington officials.
The deal is currently awaiting a recommendation from the Committee on Foreign Investment in the United States (CFIUS), and the Treasury Secretary Steve Mnuchin thinks it’s a great deal, while Republican senator Josh Hawley is calling for its rejection.
“CFIUS should promptly reject any Oracle – ByteDance collaboration, and send the ball back to ByteDance’s court so that the company can come up with a more acceptable solution. ByteDance can still pursue a full sale of TikTok, its code, and its algorithm to a U.S. company, so that the app can be rebuilt from the ground up to remove any trace of CCP (Chinese communist party) influence,” Hawley said in a letter to CFIUS.
Hawley added that the new deal will not eliminate the threat of national security.
“Perhaps, given constraints imposed by Chinese law, the only feasible way to maintain Americans’ security is to effectively ban TikTok app in the United States altogether. In any event, an ongoing ‘partnership’ that allows for anything other than the full emancipation of the TikTok software from potential Chinese Communist Party control is completely unacceptable, and flatly inconsistent with the president’s Executive Order of August 6,” he said.
Trump is expected to receive the CFIUS’ recommendation later this week and make a decision based on that. The fate of the deal will however lie on whatever he chooses to do.