Headwinds in the US: How TikTok wants to save its US business with a trick

TikTok wants to save its U.S. business. © Stanislav Kogiku/IMAGO

The Chinese video platform Tiktok is struggling with a lot of criticism in the USA – and for survival. Does the unprecedented Project Texas offer a way out for everyone involved? In Germany, too, cyber experts are now warning of data misuse and state propaganda by Tiktok and its parent company Bytedance.

This article is IPPEN. MEDIA in the course of a cooperation with the China.Table Professional Briefing – it was first published by China.Table on May 17, 2023.

Former cyber criminalist Dirk Beerhenke has been waiting for this opportunity all his professional life. But it was not until his retirement that the retired chief commissioner and his concerns were heard directly by German politicians. A few weeks ago, Beerhenke was invited to the Children's Commission of the Family Committee in the German Bundestag. The six-member committee represents the interests of children and young people in parliament.

Beerhenke informed the parliamentarians about the digital dangers for minors. He explicitly warned against the use of the Chinese video platform Tiktok, similar to Education Minister Bettina Stark-Watzinger (FDP) recently. "There are two reasons for my concern: data security and propaganda," the 62-year-old told Table.Media. "When I combine my professional knowledge with the political backgrounds that prevail in China – then I come to the conclusion that we should not use Tiktok."

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USA: Montana creates law on possible Tiktok ban

The former investigator warns: Personal and biometric data, movement profiles and voice colors fall into the hands of an autocratic government through the use of Tiktok. U.S. corporations have similar data treasures. However, their anchoring in democracies based on the rule of law is a control instrument that prevents simple access to this data by a government.

In the USA, the discussion about Tiktok has been very intense for a long time. In mid-April, U.S. CEO Shou Zi Chew had to answer questions before the U.S. Congress. The questions covered national security issues and Tiktok's ties to China. Shou, who comes from Singapore, was unable to provide clarity. "Nothing you've said so far reassures me," said U.S. Democrat Lisa Rochester. "Frankly, your statements raised more questions."
The U.S. state of Montana has already passed a law that would allow Tiktok to be banned. It is not certain whether such a ban would also stand up in court. Nevertheless, this possibility has been hovering over the US offshoot from Bytedance in Beijing for months now.

Project Texas: Ceding core tech segments to Oracle

Tiktok generated almost six billion US dollars in advertising in the US in 2022, making it lucrative for the group. Therefore, Tiktok is offering extensive concessions to the US authorities. The operators seem willing to cede control over the content and data of the application to the Americans. Tiktok, it is said, would leave the composition of a management team to the authorities, hand over core segments of its technology to the US software manufacturer Oracle and release the algorithms for independent review.

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This plan was dubbed "Project Texas" because that's where Oracle is headquartered. This was reported by the online portal Cyberscoop. The idea for Project Texas had brought the platform itself into play. Samm Sacks of Yale Law School's Paul Tsai China Center sees this as "a serious effort to address the concerns of the U.S. government." "The U.S. government would get the ultimate oversight and control over compliance with the agreements," he told the online portal.

Tiktok: Allegations by ex-employees

The U.S. government fears ideological influences of the Chinese government on the approximately 80 million users in the U.S. This is because Tiktok's algorithm not only generates suggestions of content for its users based on their own preferences and those of their respective contacts – but instead searches the entire library of uploaded videos. This makes it possible to present any content to users. Chinese soft power, in other words. However, the control can also lead to censorship and blocked search terms.

Tiktok sees itself unjustly pilloried. And it now also has to defend itself against accusations from an insider. The former head of the engineering department of the U.S. business accuses the parent company ByteDance of having offered itself as a "propaganda tool" of the Chinese government. Tiktok, for example, has incited "hatred against Japan" and restricted content that supported pro-democracy protesters in Hong Kong. The ex-employee also emphasized that Chinese authorities had access to the company's entire data material from the United States.

The statement fuels U.S. authorities' concern that Tiktok is providing the Chinese government with a massive trove of personal data of U.S. citizens, which is fed into a meticulous surveillance system. China is using its technology to crack down on critics around the world.

U.S. version shielded from China

Bytedance had announced access to data from users from the rest of the world in early December. Tiktok defended the decision as a "proven necessity" for employees in China to be able to do their job. For example, the transfer is in line with the European Data Protection Regulation.

The catch is that Chinese companies in the People's Republic are forced by law to cooperate with the authorities. When the authorities demand data, a company has to bow. "Even a European data protection regulation is of no use. We are dealing with an authoritarian state that no legal situation prevents it from gaining access," says cyber investigator Beerhenke.

With Project Texas, all processes relevant to national security in the United States could be transferred to the separate business unit. The new organization would have a management board that would have to be approved by the investment regulator CFIUS. An American version of the app would therefore be completely shielded from the Chinese owners. (Marcel Grzanna)