ByteDance Forms Joint Venture to Manage TikTok's U.S. Operations

By David Shepardson WASHINGTON, Dec 18 (Reuters) - Chinese tech giant ByteDance, the parent company of TikTok, announced on Thursday that it has entered into binding agreements with three major investors to establish a joint venture dedicated to operating TikTok’s app in the United States. This move, led by American and international investors, aims to mitigate the risk of a government ban, marking a crucial development in a saga that has persisted for years. More than 170 million American users frequently utilize the short video platform, which faced significant scrutiny since August 2020 when former President Donald Trump initially attempted a ban. The current agreement aligns with plans disclosed in September, when Trump postponed the enforcement of restrictions that could ground the app unless its Chinese ownership was divested, as part of efforts to separate TikTok’s U.S. operations from its global framework. TikTok CEO Shou Zi Chew informed employees in a memo obtained by Reuters that the agreement paves the way for continued engagement with over 170 million users as part of a dynamic global community. The joint venture will see American and international investors acquiring an 80.1% ownership while ByteDance retains a 19.9% stake. Chew stated that the new entity will function independently, exercising control over U.S. data security, algorithm management, content moderation, and software compliance. Despite new regulatory scrutiny, Chew emphasized that TikTok's U.S. operations will handle global product integration and key business functions such as e-commerce and advertising. The partnership, called TikTok USDS Joint Venture LLC, involves managing investors Oracle, Silver Lake, and Abu Dhabi-based MGX, who together will hold a 45% stake in the venture, as noted in an internal memo that corroborates previous reports. While Oracle declined to comment, concerns persist regarding the arrangement, as raised by Democratic Senator Elizabeth Warren, who called for increased transparency regarding the deal's implications. The new joint venture is positioned to address longstanding national security concerns and marks a pivotal step towards ensuring continuity of TikTok’s operations in the U.S. The 2024 law necessitated TikTok's cessation of operations by January 19 unless a divestiture of its U.S. assets was completed, a scenario averted when Trump opted not to enforce it after commencing his second term. Trump's directive in September specified that the algorithm would be overseen by U.S. security partners, allowing the joint venture until late January to finalize operations. The agreement stipulates that ByteDance will appoint one of seven board members to the new entity, which will primarily consist of American representatives. TikTok declared its commitment to uphold U.S. data protection and security protocols, with Oracle identified as the 'trusted security partner' tasked with ensuring compliance and maintaining secure storage of U.S. user data. Analysts predict a smooth approval process for the deal, given the government's prior involvement in its formation.