China is preparing a significant fine for Tencent Holdings as part of a broad antitrust restraint on Internet giants in the country, but is likely to be less than the record $ 2.75 billion (approximately $ 20,370 crore) fine imposed on Alibaba earlier this year. month, two said people with direct knowledge of the subject.
Tencent should expect a fine of at least CNY 10 billion (approximately Rs. 11,450 kroner), significant enough for the State Administration of Market Regulation (SAMR) to set an example, both said.
Tencent has been fined for misreporting past acquisitions and investments for antitrust reviews, a crime with a fine limited to CNY 500,000 (approximately Rs. 57 laha) per case, and for anti-competitive practices in some of its businesses, with particular emphasis on current music transmission, sources said.
Neither SAMR nor Tencent immediately responded to Reuters’ requests for comment.
“The regulator’s attitude is that, unlike Alibaba, you are not the biggest target here, but it would be impossible not to punish Tencent now that the campaign is in place,” said one of the people.
In recent months, China has been trying to limit the economic and social power of its once weakly regulated Internet giants, in support of President Xi Jinping.
Tencent and Ali Baba are the two largest technology conglomerates in China, with a market value of $ 776 billion (approximately $ 57,488,250) and $ 642 billion (approximately $ 47.55,900), respectively.
Earlier this month, SAMR imposed a record fine on Alibaba after an investigation found that the e-commerce company had abused its dominant market position for several years.
Tencent’s big business includes video games, content streaming, social media, advertising and cloud services.
The SAMR investigation focuses in part on the Tencent Music Entertainment Group, which was spun off and listed in the United States in late 2018, said two people and two other sources close to the business. Tencent Music Entertainment did not respond immediately to the request for comment.
The regulator has informed Tencent that it must expect a fine, waive exclusive music rights and may even be forced to sell the acquired Kuwo and Kugou music applications, people said.
Tencent’s core business, however, is video games and WeChat, will probably remain intact, said one of the people.
Music Tencent, China ‘s response to Spotify, acquired competing applications Kugou and Kuwo in 2016 and pursued exclusive streaming rights with record companies, including Universal Music Group, Sony Music Group and Warner Music Group.
It then sublicensed some of the rights of competitors, including NetEase Cloud Music, who complained that the agreement was unfair and prices were too high.
SAMR launched a probe in Tencent Music in 2018, but refused it in 2019 after the company agreed to suspend the renewal of some of the exclusive rights, which usually expire after three years, two sources told Reuters.
However, he retained the exclusive rights of Jay Chow, the most influential pop star in the Chinese-speaking world, using him as a competitive advantage over smaller competitors NetEase Cloud Music and Alibaba-backed Xiami Music.
SAMR told Tencent Music that it should expect to waive some of the other exclusive rights, two of the people said.
Kugou and Kuwo may have to be sold to competitors or other investors, with one option being offered to senior government officials in Beijing, three sources said.
The forced sale of these units would set a precedent and could be difficult to enforce, two warned.
The final confirmation of Tencent’s sentence will require a nod from China’s central leadership, people said.
Tencent is lobbying for a milder punishment, they added.
“Tencent doesn’t mind paying a hefty fine and is willing to pay more if necessary, as long as its core businesses remain intact,” said one person, referring to his video games and WeChat applications.
Last month, Reuters reported that Tencent would have to meet certain conditions in its plan to merge Huya and Douyu, two leading video game streaming platforms, including a waiver of the exclusivity to broadcast Tencent games to competing streaming sites.
SAMR said this week that it was investigating Tencent-backed Meituan on allegations that the food delivery giant had forced suppliers to use their platform exclusively for the same crime for which Alibaba was punished.
© Thomson Reuters 2021