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TikTok causing headache for SoftBank following US scrutiny

TikTok investigation requested by Sen Rubio

Calls for a review of ByteDance‘s purchase of the popular social media app TikTok by US Senator Marco Rubio could also hit the Japanese tech investor SoftBank.

SoftBank’s Vision Fund, a major sponsor of the Chinese-owned ByteDance, one of the world’s most valuable privately-owned technology companies, continues to reel from the fall in the value of its investor WeWork shareholding.

Rubio, a Florida Republican senator, called on Cfius, the United States Foreign Investment Committee, to investigate the 2017 acquisition by ByteDance of Musical.ly, a video software which was later renamed TikTok, for purposes of “censorship content” to gain favour with Beijing.

ByteDance purchased Musical.ly at the end of 2017 for $800 million to broaden its appeal outside China.

Cfius is also able to look at transactions retroactively and could pressure ByteDance, which analyses the national security implications of foreign investment in US companies, to sell TikTok, the resource which fuelled its explosive growth. Some weakening of the price of ByteDance would affect the wilting returns of the Vision Fund.

Earlier this year, Cfius directed the Chinese operator of the Gay Dating App Grindr, Beijing Kunlun Tech, to sell its majority stake in the Dating App Grindr to avoid a conflict between confidential user data and HIV status.

“Today I will be asking Cfius to investigate TikTok’s purchase of Musical.ly,” tweeted the Florida Republican. “There is widespread and growing evidence that TikTok’s platform for western markets, including the US is censoring content in accordance with the guidelines of Chinese communist governments. And India included restricting access to inappropriate children’s content, as well as questions about data privacy.

Nonetheless, the social media platform is now accused of censoring content on politically sensitive topics, including protests in Hong Kong. TikTok disputed the arguments.

In a mailed statement to the Nikkei Asian Review, a TikTok spokesperson said that the organisation plans to set up an independent committee to encourage accountability, “Our content and management policies are led by our US-based team and are not controlled by any foreign government,’ including China.

The filtering of content, Paul Marquardt, a Washington-based Cleary Gottlieb law firm, said: “does not seem to fall into the kind of thing Cfius is usually focused on.” Cfius “not indifferent to transactions that might be contentious, but they are very cautious in trying to only look at national security issues,” Marquardt adds. “How they look at your transactions might be influenced by political factors, but the response they offer after they look at it probably won’t be.” Rubio’s call for a study of TikTok, which Facebook sees as a rival, comes two days after the US. The Trade Department identified 28 Chinese companies and governmental agencies in Western Xinjiang Province for their involvement in government surveillance.

More than a million Uighurs and other ethnic minorities were registered in Xinjiang detention camps, according to the United Nations.

Security systems provider Hikvision and artificial intelligence start-ups SenseTime and Megvii are among the firms that can no longer afford to buy U.S. innovations.

Megvii recently filed an initial public offering for Hong Kong. Goldman Sachs, one of the sponsors of Megvii’s share sale, said it “evaluating” its position in listing “in light of the recent developments.” Washington has expanded its scrutiny beyond those it initially targeted, such as telecom equipment provider Huawei Technologies, by its recent actions against Chinese tech companies. Many of the new targets are under ten years old.

 

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