Can Trump demand payment from the Microsoft, TikTok deal? Probably not

President Trump insisted that the U.S. government receive payment for its sale.

August 5, 2020, 5:36 PM

The fight for TikTok's future intensified this week when President Donald Trump insisted that the U.S. government receive payment if Microsoft, or another American company, acquires the Chinese social media giant.

Trump said on Saturday that he would ban the app in the United States over security concerns. Days later he set a Sept. 15 deadline for action on TikTok, a social platform that allows users to share short videos, to allow it to avoid a ban.

"A very substantial portion of that price is going to have to come into the treasury of the United States because we are making it possible for this deal to happen," Trump said Monday. "Right now, they don't have any rights unless we give it to them."

The Treasury Department did not respond to inquiries from ABC News about how it could receive payment in the event of a successful deal.

But through the little-known Committee on Foreign Investment in the United States, which is based at the Treasury Department and evaluates the national security risks of foreign investments, the president does have the authority to either compel a sale or order the company to cease its operations.

The force of a sale is not without modern precedent.

In 2019, the U.S. government demanded the owners of Grindr, a gay social networking app, surrender ownership of their company. CFIUS determined that Grindr's ownership -- Beijing Kunlun Tech Co., a Chinese gaming company -- posed a risk to national security.

PHOTO: This Feb. 25, 2020, file photo, shows the icon for TikTok in New York.
This Feb. 25, 2020, file photo, shows the icon for TikTok in New York. President Donald Trump will order China's ByteDance to sell its hit video app TikTok because of national-security concerns, according to reports published Friday, July 31, 2020.
AP, File

The CFIUS has focused its efforts recently on investigating Chinese investment deals into companies with significant U.S. influence.

Of the 552 transactions that CFIUS reviewed between 2015 and 2017, more than 25% were Chinese investments, according to a report from the Center for Strategic and International Studies.

ByteDance, TikTok's parent company, did not seek authorization from CFIUS when it purchased in 2018, which is one of the reasons TikTok is now under investigation by the committee. As TikTok increased in popularity, worries grew over the possibility that the Chinese government could also use the app to gain information on U.S. citizens.

Additionally, before COVID-19 put the country in crisis-response mode, lawmakers called for a national security probe into TikTok, sounding the alarm that it could be censoring politically sensitive information and potentially be a tool for Chinese national intelligence agencies.

"Security experts have voiced concerns that China's vague patchwork of intelligence, national security, and cybersecurity laws compel Chinese companies to support and cooperate with intelligence work controlled by the Chinese Communist Party," wrote Sens. Charles Schumer, D-N.Y., and Tom Cotton, R-Ark., in a 2019 letter to then-acting Director of National Intelligence Joe Maguire.

"Without an independent judiciary to review requests made by the Chinese government for data or other actions, there is no legal mechanism for Chinese companies to appeal if they disagree with a request," the letter added.

On Wednesday, Secretary of State Mike Pompeo blasted TikTok, WeChat and other social media apps as "significant threats to personal data of American citizens, not to mention tools for CCP (Chinese Communist Party) content censorship."

He did not announce any new action against TikTok or others, but said the administration wants "to see untrusted Chinese apps removed from US app stores." Action against TikTok remains "pending," he said.

PHOTO: President Donald Trump speaks during a briefing with reporters in the James Brady Press Briefing Room of the White House, Aug. 4, 2020, in Washington.
President Donald Trump speaks during a briefing with reporters in the James Brady Press Briefing Room of the White House, Aug. 4, 2020, in Washington.
Alex Brandon/AP

Trump has compared payment for the sale of TikTok to a landlord-tenant relationship.

"I use the expression it’s like the landlord and the tenant, and without the lease the tenant doesn't have the value," Trump said at a briefing Monday evening. "Well we are sort of in a certain way the lease. We make it possible to have this great success. TikTok is a tremendous success, but a big portion of it is in this country."

But experts say the demand of payment from the deal is without precedent and would be considered illegal.

"My first instinct is that this is not a real policy; this is Trump making something up as he is speaking," said Geoffrey Gertz, a fellow with the Global Economy and Development Program at the Brookings Institution. "There's nothing in CFIUS that would give the authority to expect a payment. It's not clear how it would work."

Microsoft, however, confirmed both its interest in the potential purchase of TikTok, and in offering up government compensation.

The company said in a blog post, "it is committed to acquiring TikTok subject to a complete security review and providing proper economic benefits to the United States, including the United States Treasury."

This report was featured in the Thursday, Aug. 6, 2020, episode of “Start Here,” ABC News’ daily news podcast.

"Start Here" offers a straightforward look at the day's top stories in 20 minutes. Listen for free every weekday on Apple Podcasts, Google Podcasts, Spotify, the ABC News app or wherever you get your podcasts.

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