2020-08-05 by W.M.
Trump’s demand that the US get a cut of TikTok’s sale could set a dangerous precedent
It’s a demand that experts say is far outside the norm at best, and if it were to be met could set a dangerous precedent.
“It’s really not for the President to say that a deal can go through or a deal can’t go through, or that a company must pay a ransom to the United States government or get a deal done by a particular deadline,” said Avery Gardiner, general counsel and senior fellow for competition, data and power at the Center for Democracy and Technology. “That’s very unusual, it’s more than very unusual. It’s wrong, it doesn’t happen.”
“The only argument I can see the government making is that they should be compensated for the time and effort they spent on this,” Bialos said. However, “to require that part of the consideration ByteDance is getting from selling its business go to the US government, I think that’s an overreach.”
The TikTok saga could also scuttle potential future deals in a tech industry already under scrutiny.
“The recent events around TikTok will change the way we look at companies that are based in China or have interest in expanding to China, which is often one of the most interesting markets to expand into from the US,” said Mike Jones, co-founder and managing partner at Science Inc, a Los Angeles-based incubator and tech studio that’s backed companies such as Dollar Shave Club and Bird.
“The recent developments give us pause and change the way we think about company growth and development when the government could block them from crossing into markets,” Jones added.
“That’s going to make American companies think twice about purchasing or being purchased by Chinese entities in the tech space,” she said. “I think that does have a chilling effect on the merger landscape.”
It’s a slippery slope with the potential to fundamentally change how business is done in the United States.
“I suppose it’s possible that any company could voluntarily write a check to the US Treasury, but making that a de facto requirement for mergers in the United States would be incredibly dangerous,” said Gardiner. “To condition deals on requiring a payment to the government would be a drastic change and, in my mind, it would be a terrible mistake.”
— Sara O’Brien contributed to this report.