WHAT IS CFIUS?
Treasury Secretary Janet Yellen oversees CFIUS, a committee made up of members from the State, Justice, Energy and Commerce Departments among others, which investigates national security risks from foreign investments in American firms.
The committee screens business deals between US firms and foreign investors and can block sales or force parties to change the terms of an agreement for the purpose of protecting national security. The committee’s powers were significantly expanded in 2018 through an act of Congress called the Foreign Investment Risk Review Modernization Act, known as FIRRMA.
In September, President Joe Biden issued an executive order that expands the factors that the committee should consider when reviewing deals – such as how the deal impacts the US supply chain or risks to Americans’ sensitive personal data.
SELL, BAN OR ORACLE?
Defying CFIUS’ orders to sell ultimately could mean doing business with the company may violate the law. That would suck the life out of its business operations, such as banking, payroll, advertising, and app store services.
But the company said it’s already mitigating national security concerns with a US$1.5 billion mitigation plan called Project Texas that would route all US user data to servers owned and maintained by the US software giant Oracle.
“When that process is complete, all protected US data will be under the protection of US law and under the control of the US-led security team. Under this structure, there is no way for the Chinese government to access it or compel access to it,” Chew said.
While CFIUS can adopt such mitigation agreements, it’s not clear if the committee will accept TikTok’s proposed alternative, said Anupam Chander, a Georgetown University technology law professor. If CFIUS rejects TikTok’s preferred solution, Chander said the federal agency should have an obligation to explain how it finds that plan to be insufficient given that it amounts to an enormous restructuring of the company.
“TikTok proposes lots of well-paid, third-party auditors that would be doing this kind of routine monitoring,” Chander said. “This is an expensive proposition for TikTok but by no means would I treat this as window dressing.”
