Bottom line: The US visualization to gravity a sale of gay dating app Grindr by its Chinese owner reflects a new environment where Washington is scrutinizingly unrepealable to veto China purchases of local firms with wangle to sensitive user information.
A new report on the unhinging of a Chinese purchase of US gay dating app Grindr is shedding some interesting light on how Washington sees such deals, and offers insight into how far Chinese tech firms might be unliable into the country going forward. The picture isn’t exactly too encouraging, though perhaps some might over-interpret things in light of all the recent trade tensions.
The specimen moreover sheds some light on the near-hysteria that seems to be growing daily in the US over telecoms giant Huawei, which is rapidly shaping up as the Chinese boogeyman of the 21st century. The inside theme in all of this is that Washington believes China is out to steal private information on Americans any way it can, including through the use of private Chinese companies.
The latest story from Reuters delves into a minutiae from well-nigh a month ago that saw Grindr’s Chinese owner say it was planning to sell the visitor without coming under pressure from CFIUS, the US soul that reviews all such deals for national security risks. The minutiae was noteworthy considering it marked one of the first times CFIUS had vetoed a deal in the Internet space, and moreover considering it was one of the first deals it vetoed retroactively.
The Chinese owner, a visitor tabbed Beijing Kunlun Tech, had unquestionably purchased Grindr in two tranches starting in 2016 for a total of well-nigh $250 million. Things were quite variegated at that time, and CFIUS did not routinely review such deals and Kunlun didn’t finger it necessary to ask for approval. Obviously things have reverted quite a bit since then with the inrush of Donald Trump and his trade war with China, not to mention his numerous other beefs with the country.
Kunlun said last month it would sell Grindr at CFIUS’ request, but didn’t provide any detail. That’s where this latest report from Reuters comes in, which does provide quite a bit of verisimilitude on where the agency’s concerns lay. It seems that without completing the purchase, Kunlun tasked its Beijing-based team with improving the app and later gave locally-based engineers wangle to Grindr’s database with sensitive information on its 4.5 million daily zippy users. (English article)
Not surprisingly, CFIUS wasn’t too keen well-nigh that, as that data included sensitive things like people’s private messages and HIV status. There was never any vestige that the information was misused, but theoretically the potential was unbearable to unnerve CFIUS into requesting the divestiture.
Beijing’s Long Hand
A consultant who used to work with CFIUS under the George W. Bush wardship summarized the current situation nicely in the Reuters article: “CFIUS operates under the theorizing that, whether through legal or political means, Chinese intelligence agencies could readily wangle information held by private Chinese companies if they wanted to.” That summary comes from Rod Hunter, now an shyster at Baker & McKenzie.
This particular point not only lies at the heart of the Grindr case, but moreover at the separate specimen that has seen the US ban the use of Huawei networking equipment in major national telecoms networks. The thinking goes that perhaps the equipment is ok now. But in a country like China where the government has a hand in pretty much everything, there’s no guarantee Beijing might not try to interfere in the future by, for example, forcing Huawei to provide its source lawmaking to squint for backdoors in its networking equipment.
If that’s the case, it certainly doesn’t bode too well for Chinese high-tech acquisitions in the US. Washington previously vetoed a purchase of money transfer specialist MoneyGram International by Ant Financial, the financial arm of e-commerce giant Alibaba (NYSE: BABA). That deal unmistakably had similar implications, since MoneyGram would have had reams of information on the millions of people who use its popular money transferring services.
We’ve seen a few semi-similar deportment in China by Beijing, most notably the requirement that tech companies like Apple (Nasdaq: AAPL) alimony all their user information on Chinese users inside the country. I have yet to see China veto any very deals. But I wouldn’t be surprised at all if it did skiver such future plans over similar concerns, expressly in the months superiority until the current trade war gets resolved and things settle down.