China’s new law on AI tech has sent a potential buyer of Tic Tac Toe back to the drawing board. Reuters reports that negotiations to acquire U.S. operations in Tiktuk have taken a deadly toll on bidders to determine ways to comply with China’s updated export rules.
Earlier this week, Beijing unveiled an amendment to its technology export laws to cover “recommendation of information-based personalized information services” – this is essentially the key to TickTock’s viral success. Any foreign business that wants to acquire products with AI-based proposed engines must now secure the local government approval stamp, according to the new rules.
In a statement at the time, Bytens general counsel Erich Anderson said the company was “studying the new regulations” and would “follow applicable laws.” He added, “As with any cross-border transaction, we will follow applicable laws, including the United States and China.”
Potential buyers are basically exploring a total of four routes to restructure the deal, and none of that seems promising, Reuters says. The most obvious and convenient option would be to simply acquire Tiktok without algorithms but it would seem, as would be risky companies like Microsoft or Oracle, two of the reported front-runners, not interested in taking. TickTock’s algorithm is its core component and can render virtually worthless acquisitions for buyers interested in removing it from the contract.
At the opposite end of this spectrum, visitors consider the issue of approval from China. But that is unlikely to happen as political tensions between the United States and China continue to escalate – especially given that a solution needs to be reached before the November 12 deadline proposed to avoid sanctions.
We reached out to Bidance, Microsoft and Oracle for a comment and we’ll update the story when we hear.
Another option is to work with the Committee on Foreign Investment in the United States (CFIUS) for a one-year transfer period. Reuters did not comment on how the plan could possibly unfold, but over time the new owner may be able to replicate the algorithm and eventually leave TickTock’s parent company, Engine Bytendance.
By the end of the day, Bytens could be asked to license the algorithm for the American giant who ended up acquiring the U.S. business. However, again, it would go beyond the regulatory lines especially with the United States not feeling comfortable. The Trump administration has made it clear that Tiktok will have to give up all its Chinese ties in order to continue working in the United States.