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China's Antitrust Regulator Clamps Down on Tencent Businesses

Tencent and its businesses have recently become the target of China's antitrust regulator, who has plans to block two of the company's business ventures.

Tencent's headquarters in Shenzhen, China. Credit: Getty Images

Two people who claim to be familiar with the situation informed Reuters that the State Administration of Market Regulation (SAMR), China's antitrust regulator, will be ordering Tencent to give up exclusive rights to music labels it has used to compete with its smaller rivals. They also plan on fining the company 500,000 yuan for reporting errors in the acquisition of the Kuwo and Kugou apps for antitrust review and anti-competitive practices but was withdrawn due to Tencent lobbying for leniency.

These exclusive rights came from Tencent's desire to fend off competition from its music streaming arm, Tencent Music, which is China's version of Spotify. These exclusive rights were the subject of a previous SAMR investigation in 2018 which was stopped after the company agreed to let the exclusive rights expire without renewal.

Although the SAMR did not respond to Reuters' requests for comments on the insider information, it is confirmed that China's antitrust regulator will block Tencent's plans to merge the country's top two video game streaming sites, Huya and DouYu, on antitrust grounds. The plan was also previously revealed by three people familiar with the matter, who informed Reuters of the goings-on in the company.

It is unknown if the two people who informed Reuters of the SAMR's latest plans are also among the three that informed them of the antitrust regulator's plan on blocking the merger.

Regardless, the merger, which was announced on 5 August 2020, was blocked due to the combined market share of Huya and DouYu exceeding 70%. This would result in Tencent strengthening its dominance in the online game market, of which they have a 40% market share in the online games operations segment.

Twitch-like streaming website, Huya, in its debut in the New York Stock Exchange on 11 May 2018. Credit: Huya

Zhang Chenying, a member of the state council's anti-trust committee, mentioned that if Huya and DouYu were to merge, then it would eliminate or restrict fair competition. He also added that the original joint control of DouYu will become Tencent's "complete control of a merged entity".

Both Tencent and DouYu stated that they will abide by the SAMR's decision, adding that they will "comply with all regulatory requirements to operate in compliance with applicable laws and regulations". Huya, however, has not released a statement on the matter.

These plans are part of the SAMR's efforts to reinforce regulation on China's tech and internet giants to curb their economic and social power, Reuters reports. The clampdown was also supported by President Xi Jinping, which was announced in March 2021.

Other tech giants, like Alibaba, are not spared from these efforts. The company was reported to have been fined 18 billion yuan for abusing its market position in April 2021.


Written by John Paul Joaquin

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