Trump approves TikTok deal as questions swirl

Former Facebook Policy Director Matt Perault joins Yahoo Finance’s Akiko Fujita to discuss the latest on the Oracle-TikTok deal.

Video Transcript

AKIKO FUJITA: Oracle and Walmart have agreed to acquire a 20% stake in Chinese social media app TikTok. The deal with parent company ByteDance would result in a new entity known as TikTok Global that would be headquartered here in the US. Now, President Trump said over the weekend he approved the deal, but reversed course this morning, saying Oracle and Walmart would need to have complete control.

Meanwhile, China's Global Times reporting Beijing is unlikely to sign off on the deal now. Let's try to break all of these developments down with Matt Perault. He's a former Facebook Policy Director. He's also the Director at Center on Science and Technology Policy at Duke University and an associate professor there. And Matt, it's great to have you on today. I wanted to see what you make of all the headlines that have come out here.

We've got these statements from all the companies involved, all the parties involved over the weekend, which seemed to really breakdown pretty clearly at least what the stake would be, a 20% stake we're talking about, a new entity that would then go public. But then you've got the president's reversing course today. How do you read between the lines here?

MATT PERAULT: I think it's very difficult, Akiko, to make sense of what's going on. I think the main thing that we can take away from today's events and the events over the weekend is that political interference in the tech sector just doesn't work.

You want companies like TikTok, and also companies like Facebook, and Google, and Amazon, and Apple, and Microsoft, you want them focused on building the best possible technology products they can, not trying to digest what the president said in a recent press conference and trying to understand how that's going to affect their business.

AKIKO FUJITA: Having said that, we are kind of in this reality now where it's not just US tech that is leading the way. You've got TikTok, which is the most successful Chinese app here in the US. Certainly there's going to be a lot more.

Is there a template here that the Trump administration has created for potential vetting of the technology? And if so, where does that lead us down-- what path does that lead us to, when we're talking about a, quote, unquote, free and open internet?

MATT PERAULT: I think it's a long, dark road. We actually do know this playbook. And unfortunately, it's the Chinese tech policy playbook. We've seen it play out over the last 20 years. It's a playbook that focuses on requiring foreign companies to work with local entities or to divest in order to operate locally. It's a playbook that requires them to store data locally, force data's localization.

It's a playbook that requires them to comply with domestic national security law. Those are all things that the US government has historically resisted and criticized about the Chinese approach. It's now the approach that we're using in the US, and I think it's a far cry from the internet freedom principles that we've seen over the last 20 years.

AKIKO FUJITA: Matt, let me backtrack a bit and talk about the specifics of this deal, because even though we know what the breakdown of the stake is, at least according to how the companies have reported this, we don't really know how the security issues are being addressed.

Knowing the specifics that have at least been made public, do you think this addresses the data collection concerns, the concerns of a potential Chinese back door that were initially questioned in those executive orders the president signed in August?

MATT PERAULT: I don't think it does, and I don't think it does for two reasons. The first reason is that it doesn't change very much. So even though Oracle would manage TikTok's data, it's not clear that the decision making is really going to differ dramatically from what it looked like previously. The second reason I think that this doesn't change very much is that the security concerns were never articulated very specifically, so it was never clear exactly what the problems were.

There was a lot of insinuation about the perils and pitfalls of having a Chinese company or Chinese-owned entity run a company like TikTok that has grown to such popularity in the United States. But it was never clear what the security issues were. And so it's not clear if they will be fixed going forward.

AKIKO FUJITA: What do you think that the US tech companies are thinking, seeing this all play out? We got those comments from Instagram on Friday when we initially thought there was going to be a ban on TikTok, as well as WeChat in place, saying this is not the direction the US should be going in. And yet, you have to wonder if TikTok, if who knows how this deal is going to end up, if it is not saved in the US, that's essentially a huge boost for Facebook, right?

MATT PERAULT: Well, TikTok is one of the strongest competitors to US tech companies, like Twitter, and Google, and Facebook. I think that's a really good thing for the tech ecosystem. We've heard a lot of criticism of the tech ecosystem for being too concentrated. And so it's helpful to have strong competitors. And TikTok has been a strong competitor.

So in the short term, I think it might be a business advantage for those companies if TikTok were eliminated. But as I said before, this is a long, dark road in terms of internet policy globally. I think it's very likely that if the US moves forward in taking strong action, we'd see retaliation from the Chinese government. That is not going to be a good thing for US tech firms that are operating in China or operating in other countries throughout the world.

AKIKO FUJITA: And Matt, the other development we got out of China over the weekend, Beijing finally unveiling what has long been expected, that unreliable entity list. You talk about the US taking a page out of China's playbook. This is the Chinese looking at the US entity list, saying, we're going to match you with that.

There's a number of companies that are operating in China, like a Microsoft, Apple, Cisco, not just the tech names, but we know that the Chinese government has broad authority to go after any one of these companies. Where is this all leading to when you look at this tit for tat that's happened, particularly in the tech sector?

MATT PERAULT: Well, the problem with protectionism, is usually it's done in the name of consumers and businesses. And often what happens is reprisals from the other country that's involved in a way that ends up hurting consumers and hurts businesses in the long run.

It doesn't surprise me at all that we've seen China take action here. It feels like what the Trump administration is doing is playing chess, as if it's pretending that the opponent isn't going to have an opportunity to move. We have seen China take more authority to take a stronger position on US companies. And I think that if the Trump administration moves forward in the direction it's going in, it's going to hurt US companies and also hurt US consumers in the long run.

AKIKO FUJITA: Matt Perault, always good to talk to you on these issues, appreciate your time.

MATT PERAULT: Thanks so much for having me on.