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Conditions required for TikTok payments made by Microsoft to the U.S. government

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In one of the crazy news stories and 2020, this is something to say, President Donald Trump said at a media usability event today that for the US government to sign a potential Microsoft/TikTok deal “According to a rough transcript from my colleague Alex Wilhelm, part of that price will have to go to the U.S. Treasury Department.

In reality, it seems almost impossible to execute it. Companies are not just quotations-cancel quotations and bribe the U.S. government to sign their documents, but let’s look at it at face value: Microsoft should pay, and if it does, what should they ask for? Bargaining with the US government?

First, some context. TikTok’s parent company ByteDance has a market value of more than $100 billion. ByteDance has a complete set of applications, including Douyin, TikTok’s very popular sister application that focuses on China, and the very successful newsreader Toutiao, so it is difficult to evaluate TikTok’s valuation alone.

Tik Tok

The regulatory chaos of the transaction and the fact that many large buyers like Facebook withdrew from the market due to direct antitrust laws have compounded the ambiguity of the transaction.

For example, the price is at least 10 billion US dollars, if not tens of billions of dollars. How should Microsoft consider negotiating with the government here?

The primary goal should be to reduce regulatory issues after Microsoft’s acquisition. TikTok has a well-documented privacy issue, and it also involves young people-where regulations are very sensitive.

When Facebook faced privacy issues on its platform, it finally agreed to a $5 billion settlement with the Federal Trade Commission last year to unify all the different cases and draw conclusions.

It also agreed to adopt a series of restrictive measures and monitoring mechanisms to ensure compliance. TikTok (formerly Musical.ly) agreed to an FTC privacy settlement for $5.7 million last year.

In addition to privacy rights, you also face export licensing issues from the Ministry of Finance, data protection issues on Capitol Hill due to the origin of the application in China, and potential antitrust issues from the Ministry of Justice.

President Trump

Therefore, it is time to make a deal. Provide the U.S. government with a large sum of money depending on the final purchase price, or even billions of dollars as a “settlement money” in exchange for exemption from all privacy, trade, and antitrust laws before the TikTok acquisition Claimed immunity.

Perhaps there is a setting that Microsoft has 180 days after the acquisition to clean up privacy issues, move data to its Azure cloud, probably in the United States, and perform better than TikTok introduced in the past few months Parental control.

This is by no means a cruel setting, it can greatly limit Microsoft’s long-term debt, and it can also allow the company to avoid third-party custody and retention in many large mergers and acquisitions because in this case, the acquirer will not pay all in the advance Purchase price. Future litigation will bear a lot of costs.

It is really bad that the President himself intervened in this issue in such a direct and ingenious way. But now that President Trump has opened the door this does not look as bad as it seems at first glance.

He has the power to promote the inter-agency process, align all government stakeholders, and accept a certain degree of immunity in exchange for “fines.”

Reconciliation cannot solve all problems. Like all Internet applications in the United States, TikTok is not only governed by federal laws, but also by state laws related to privacy such as the California Consumer Privacy Act.

The settlement agreement reached with the federal government may still conflict with relevant state laws. Besides, agreeing to large payments during the heart of the election season will cause a lot of controversies, possibly on both sides of the aisle.

Nevertheless, this transaction is by no means typical, and no one would think that it will have a typical merger process.

Although few lawyers will suggest that it is a strange form of highway robbery to cooperate with the federal government, there are legitimate trust reasons that are willing to pay tolls, obtain some liability protection and move on.

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