Diller, chairman of Expedia and IAC, made his comments in a "Squawk Box" interview days after President Donald Trump agreed to approve the deal with the Chinese-based owner of the viral video-sharing app.
"It started obviously simply — to say we want to protect the security of Americans from anything that could happen to them by using TikTok," said Diller. "It has now morphed into a ludicrous game-match between tossing ownership here, control there. … Its original aims are out the window. It has just come a whole political mismash."
"The whole thing is a crock," he added.
The terms of a TikTok deal have continuously evolved since Trump issued an executive order in early August that gave TikTok 45 days to sell to a U.S. company or face a ban by Washington. The original demand was a full acquisition of TikTok by a U.S. company. Microsoft, in a joint bid with Walmart, was considered the most likely contender.
But at the last minute, China added restrictions to its technology export list to include algorithms such as TikTok's. TikTok had to pivot to pursuing a deal that would give U.S. companies only a minority stake.
"Once you start tossing this grenade about protectionism and once you start turning these things into political questions, ... it's inevitable that race just keeps going up and up and prevents natural commerce," Diller said on the broader implications of the messy negotiations.
Under the new terms, Microsoft's full acquisition offer was rejected, and Oracle and Walmart partnered to bid for minority stakes. In this version of the deal, which Trump has agreed to approve, Oracle will get 12.5% ownership and provide cloud and security services. Walmart will get 7.5% ownership and a board seat, and it will develop the app's e-commerce capabilities. Parent company ByteDance's investors, which include American, Chinese and international investors, will retain the majority of shares.
The deal still requires the approval of the Chinese government, which must give ByteDance the license to sell TikTok's algorithm and AI technology to American companies.