The news: TikTok and the Twitter acquisition are facing scrutiny from the US federal government.
- The Treasury Department’s Committee on Foreign Investment in the United States (CFIUS) is deciding whether it has the purview to investigate Elon Musk’s Twitter purchase, per The Washington Post.
- White House officials had previously discussed reviewing the acquisition based on concerns about Musk’s business ties to China and a Saudi prince being among the investors backing the Twitter deal.
- Meanwhile, Meta shares spiked 2.2% and Snap’s rose 3.4% Tuesday following FCC commissioner Brendan Carr’s call for a ban on TikTok, per CNBC. The move harks back to the Trump administration’s previous executive order banning the app.
- The CFIUS is reviewing TikTok’s national security implications due to its China-based owner, ByteDance. The Department of Justice is leading negotiations over a security deal with the company.
The geopolitical crosshairs: Social media companies coming under political scrutiny isn’t new, but the CFIUS’ interest in the Twitter deal and TikTok are some of the latest signs of the US’ harder line approach to its business and technological interests with respect to foreign powers.
- It comes in the wake of an executive order limiting foreign investment in US tech companies and the ban of advanced semiconductor exports to China and Russia.
- Although the CFIUS usually investigates investments by foreign nationals, it might consider a US citizen’s business dealings fair game given heightened sensitivities around national security.
- In Musk’s Twitter deal, there’s concern that large foreign investors with dubious ties to state governments could access confidential information related to US businesses and individuals.
- Musk-owned Tesla’s dependence on China for production could be viewed as a compounding security risk factor.
Potential outcomes: It’s hard to anticipate what the CFIUS will ultimately decide regarding the Twitter acquisition and the fate of TikTok’s US operations. However, the increasing atmosphere of scrutiny could influence how the platforms are run.
- The government is walking a fine line between protecting US national security interests and hurting businesses.
- While the Twitter deal might not be challenged due to fear of political blowback, we could see future restrictions on what types of information US companies can share with investors who have ties to adversaries.
- The scrutiny could also spur the social media companies to take combating misinformation on their platforms more seriously.
- As evidenced by the Meta and Snap shares spike, potential regulatory fallout for Twitter and TikTok could help Facebook and Snapchat chart a more positive course.