March 27, 2019 / 4:47 PM / in 24 days

Breakingviews - Grindr stokes bad blood in U.S.-China relationship

Flags of U.S. and China are placed for a meeting between Secretary of Agriculture Sonny Perdue and China's Minister of Agriculture Han Changfu at the Ministry of Agriculture in Beijing, China June 30, 2017. REUTERS/Jason Lee

NEW YORK (Reuters Breakingviews) - Human sexuality has no clear lines – a bit like foreign investment controls. The American authorities have classified Grindr, the dating app targeted at gay users, as a security risk because it’s owned by Chinese gaming group Beijing Kunlun Tech, Reuters reported on Wednesday. The fuzzy nature of overseas investment scrutiny means that one review doesn’t dictate the outcome of future ones – but it’s likely that Grindr’s problems will stoke more bad blood in the U.S.-China relationship.

Kunlun’s purchase of then-private Grindr in two stages in 2016 and 2018 was unusual in a number of ways. For one, China doesn’t legally acknowledge same-sex relationships, and forbids explicit internet content. Grindr President Scott Chen once wrote on Facebook that he believed marriage is between a man and a woman. But the deal didn’t trigger antitrust concerns. Companies didn’t then have to seek pre-approval from the Committee on Foreign Investment in the United States, or CFIUS – though the risk they then ran was that deals could be unwound later. That happened to the buyer of Ralls wind farms back in 2012.

It’s no surprise that Grindr might be seen as a potential security concern, especially now CFIUS has a clearer mandate to consider data as a security risk, following a recent expansion of its powers. Any hook-up app in which users exchange racy messages, images - and in some cases their HIV status - has the potential, in the wrong hands, to become a giant Kompromat machine. Grindr, like rivals including Scruff and Match-owned Tinder, has policies and processes to secure data. But Chinese ownership raises concerns that are impossible to obviate. Beijing itself prohibits direct foreign ownership of internet companies, and plans to use internet data to assess citizens’ “social credit.”

CFIUS doesn’t have to show its workings, which means it doesn’t have to be consistent in its decisions. That suggests that it would be wrong to see this as a new blanket approach to Chinese-backed social networks. TikTok, for example, owned by SoftBank-invested ByteDance, doesn’t raise the same issues as Grindr because posting karaoke videos offers less potential for blackmail than arranging trysts. Nonetheless, the move by CFIUS against Kunlun sends another signal that Chinese companies are less than trustworthy. That can only make existing trade and investment tensions worse.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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