Finance

The secret presidential committee that could topple TikTok

The-secret-presidential-committee-that-could-topple-TikTok

President Trump issued an executive order Thursday that could prohibit US citizens from transacting with TikTok, the popular Chinese-owned video-sharing app. The move follows a recent statement by Trump that Microsoft, which is in talks to buy TikTok, should pay a kind of bribe to the US Treasury for facilitating the proposed deal.

This is all extraordinary from a business and geopolitical perspective, and raises the question of how the president can put so much pressure on companies like TikTok in the first place. The answer lies in the Committee on Foreign Investment in the United States, an obscure but powerful body that has acquired a great new influence under the Trump Administration.

The secret presidential committee that could topple TikTok

The committee, known by its non-melodic acronym CFIUS (“Siff-ee-us”), is unknown even to many lawyers and government officials. But legal experts familiar with its operations explained to Fortune how CFIUS emerged from the dark origins of the 1970s to a force that is now reshaping US commerce.

Revival of a Ford-era relic

CFIUS is led by the US Secretary of the Treasury and is comprised of the heads of nine powerful agencies, including the Pentagon, the Department of Justice, and the Department of Energy. Various White House offices, including the National Security Council, are also involved in CFIUS business, while other agencies, including the Department of Agriculture, are vying for a seat at the table.

The committee has the power to block or cancel deals that involve foreign investors, and the president of the United States has the ultimate authority over its decisions. CFIUS does not have to share the reasons for its decrees, or even reveal their existence.

CFIUS has been around for decades but, despite its formidable powers, the committee has received little attention until recently.

“CFIUS was pretty lethargic for a long time,” explains Amy Westbrook, a law professor who has written about its evolving role.

Westbrook, who describes the CFIUS investigations as “an alien power,” notes that the committee was born under President Gerald Ford amid concerns that foreign companies would gain influence over US oil supplies, but that It only received a formal mandate from Congress in 1988.

National security evolves from oil to social media data

In the past two years, CFIUS has transformed from an occasional concern to a fixture for attorneys overseeing foreign investment in the US.

“Since the law changed and expanded, I guess there have been 200 filings this year alone,” says Veny Simidjiyska, Fox Rothschild corporate attorney.

The filings are not only tied to transactions involving geopolitical rivals like China, but also to investments made by UK investors and other US allies.

Simidjiyska added that it is impossible to know the exact number of applications as CFIUS provides little or no data on its activities. Similarly, he says there is little formal guidance on who or what is driving CFIUS’s interventions, such as the one in the TikTok case. But the source of the research is not hard to guess.

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