Negotiations between the United States and China have resulted in a proposed deal aimed at preserving the functionality of TikTok in the U.S. The agreement would allow TikTok’s new American entity to lease its algorithm from its Chinese parent company, ByteDance, according to a senior White House official speaking to Axios.
The significance of this deal lies in the potential compliance with a 2024 U.S. law that mandates TikTok must be controlled by American entities or face a ban. Initial discussions had suggested that ByteDance might be required to sell the algorithm outright. However, such an action would hinder ByteDance’s ability to operate TikTok in international markets, which the company intends to continue.
President Donald Trump is expected to sign an executive order later this week to formalize the proposed arrangement. Under the current terms, ByteDance would develop a duplicate version of the TikTok algorithm and lease it to a new joint venture. This venture would be controlled by a group of U.S. investors, including Andreessen Horowitz, Silver Lake, and Oracle.
Details of the Proposed Agreement
The arrangement stipulates that Oracle would be responsible for retraining the algorithm and ensuring the protection of U.S. user data. Notably, American users would not need to re-download the app, as it would continue to function seamlessly with its international counterpart.
According to the senior White House official, these terms received approval from the Chinese government during a bilateral meeting in Madrid last week. Nonetheless, there is potential for contention within Congress. Some legislators may oppose the leasing structure, as the legislative language explicitly prohibits “cooperation with respect to the operation of a content recommendation algorithm.” Critics may focus on the implications of “cooperation,” while supporters may emphasize the “operation of” aspect.
Investor Composition and Future Oversight
The landscape surrounding the deal remains somewhat opaque. Several existing ByteDance investors remain uninformed about the specifics, and even those close to the negotiations express uncertainty regarding the arrangement’s final details. Importantly, the U.S. government would not hold a board seat or equity stake in TikTok U.S., despite such possibilities being previously discussed.
The new board is expected to include fresh investors, existing ByteDance stakeholders, and one representative from ByteDance, who would oversee management decisions for TikTok U.S. In a recent interview with Fox News, Trump mentioned that the investor group is likely to comprise notable figures such as Michael Dell, Lachlan Murdoch, and Rupert Murdoch. However, Axios clarified that Trump was referring to a firm associated with Dell, BDT & MSD Partners, and the Murdoch-controlled Fox Corp.
As the negotiations advance, Trump has decided to extend the previous enforcement pause by an additional 120 days to finalize the details of the deal. This follows a series of delays, as TikTok was initially expected to either be sold or banned by January 2024. Now, the administration is allowing itself more time to reach a resolution.
In the meantime, Andreessen Horowitz, Oracle, and Silver Lake have either declined to comment or have not responded regarding the proposed deal and its implications.
