Tencent Faces Big Antitrust Fines In China

Tencent Holdings will be hit with a big antitrust penalty in China, but it’s not likely to be as much as Alibaba’s record $2.75 billion fine last month, Reuters reported, citing sources. As part of Chinese President Xi Jinping’s antitrust crackdown, Tencent will likely get fined a minimum of $1.54 billion by the State Administration of Market Regulation (SAMR), the sources told Reuters. 

One of the biggest companies in China and the largest technology conglomerate, Tencent is being penalized for not reporting its previous acquisitions and investments and for anticompetitive behavior. The fine is capped at 500,000 yuan.

“The attitude from the regulator is that, unlike Alibaba, you are not the biggest target here, but it would be impossible not to penalize Tencent now that the campaign is in action,” said one of the sources, per Reuters.

Tencent has a valuation of $776 billion compared to Alibaba’s $642 billion. SAMR hit Alibaba with a record penalty following a probe that revealed the company took advantage of having a dominant market position.

Part of SAMR’s investigation is centered on Tencent Music Entertainment Group, which went public in the U.S. almost three years ago, two of the sources said. Its business holdings include video games, content streaming, social media, advertising and cloud services.

Chinese regulators told Tencent that aside from a fine, the company could be required to surrender exclusive music rights and to sell its music apps Kuwo and Kugou. The company’s central businesses — video games and WeChat — will likely stay the same, according to one of the sources.

Tencent has said that it is cooperating with officials and following all regulations. The company doesn’t expect a hit to its overall business operation, but it will be subject to closer oversight.

Tencent, ByteDance and Meituan are turning to former regulators for help navigating the new tech company mandates handed down by the Chinese government. For example, Cui Shufeng, a former deputy director of the commerce ministry’s anti-monopoly bureau, has served as Alibaba’s head of policy research since 2019.

New regulations handed down last month will restrict the finance operations of Big Tech firms, including Tencent, ByteDance, JD.com, Meituan and Didi.