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Exclusive-TikTok nears Oracle deal in bid to allay U.S. data concerns-sources

Published 03/10/2022, 11:54 AM
Updated 03/10/2022, 04:35 PM
© Reuters. FILE PHOTO: A TikTok logo is displayed on a smartphone in this illustration taken January 6, 2020. REUTERS/Dado Ruvic/
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By Echo Wang and David Shepardson

(Reuters) - TikTok is nearing a deal for Oracle Corp (NYSE:ORCL) to store its U.S. users' information without its Chinese parent ByteDance having access to it, hoping to address U.S. regulatory concerns over data integrity on the popular short video app, people familiar with the matter said.

The agreement would come a year and a half after a U.S. national security panel ordered ByteDance to divest TikTok because of fears that U.S. user data could be passed on to China's communist government.

That order was not enforced after Joe Biden succeeded Donald Trump as U.S. president last year. The panel, however, known as the Committee on Foreign Investment in the United States (CFIUS), has continued to harbor concerns over data security at TikTok that ByteDance is now hoping to address, the sources said.

It is not clear whether CFIUS will find that TikTok's partnership with Oracle will resolve the national security issues it has identified, the sources said. A spokesperson for the U.S. Department of the Treasury, which chairs CFIUS, did not immediately respond to a request for comment.

Oracle had discussed acquiring a minority stake in TikTok in 2020, when ByteDance was under U.S. pressure to sell the app. The cloud computing giant will store all of TikTok's U.S. user data on Oracle data servers under the new proposed partnership, the sources said. Some of TikTok's data is currently stored on Alphabet (NASDAQ:GOOGL) Inc's Google Cloud.

A dedicated U.S. data management team of hundreds of people acting as a gatekeeper for U.S. user information and ringfencing it from ByteDance will be set up under the agreement, the sources said. The team will be comprised of engineers and cyber security personnel. The companies are discussing a structure under which that team would operate autonomously and not be under TikTok's control or supervision, the sources added.

TikTok is also exploring partnerships with other technology companies over firewalls and cyber security measures, the sources added.

A TikTok spokesperson declined to comment on the partnership with Oracle. "We continue to invest in data security as part of our overall work to keep our users and their information safe," the spokesperson wrote in an email.

Oracle did not immediately respond to requests for comment.

TikTok is one of the world's most popular social media apps, with more than 1 billion active users globally. The information of U.S. users is currently stored in TikTok data centers in Virginia, with a backup in Singapore.

The United States has been increasingly scrutinizing app developers over the personal data they handle, especially if some of it involves U.S. military or intelligence personnel.

Chinese gaming company Beijing Kunlun Tech Co Ltd was forced to sell its popular gay dating app Grindr in 2020 after CFIUS approached it with national security concerns.

© Reuters. A smartphone with the Tik Tok logo is seen in front of a displayed Oracle logo in this illustration taken, Septemeber 14, 2020. REUTERS/Dado Ruvic/Illustration

ByteDance is one of China's fastest growing startups. It owns the country's leading news aggregator, Jinri Toutiao, as well as TikTok's Chinese counterpart Douyin.

The U.S. Commerce Department is considering new rules to address potential security risks from TikTok and other foreign-owned apps, and potentially even ban some of them. The rules, if adopted, could force TikTok to submit to third-party auditing, source code examination and monitoring of user data logs.

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