China’s antitrust watchdog fined Alibaba Group Holding Ltd (阿里巴巴) and a Tencent Holdings Ltd (騰訊) unit over a pair of years-old acquisitions and said it is reviewing an impending Tencent-led merger, signaling Beijing’s intention to tighten oversight of Internet sector deals.
The Chinese State Administration for Market Regulation yesterday said it is reviewing the combination of DouYu International Holdings Ltd (鬥魚網絡科技) with Huya Inc (虎牙), which could create a Chinese game-streaming leader akin to Amazon.com Inc’s Twitch.
The regulator fined Alibaba 500,000 yuan (US$76,458) for failing to seek approval before increasing its stake in department store chain Intime Retail Group Co (銀泰商業集團) to 73.79 percent in 2017, while China Literature Ltd (閱文集團), the ebooks business spun off by Tencent, was also censured over a previous deal, it said in a statement.
The penalties come after regulators last month declared their intention to increase scrutiny of China’s largest tech corporations with new anti-monopoly rules.
Beijing last month unveiled draft regulations that establish a framework for curbing anti-competitive behavior such as colluding on sharing sensitive consumer data, alliances that squeeze out smaller rivals and subsidizing services at below cost to eliminate competitors.
Shares in Alibaba and Tencent yesterday extended losses and were down about 3 percent in the afternoon.
“Investment and takeovers are important means for development and growth of Internet companies,” the regulator said in the statement. “The above-mentioned companies have a large influence in the industry, carry out many investments and takeovers, have specialized legal teams and should be familiar with the regulations governing [mergers and acquisitions]. Their failure to actively declare has a relatively severe impact.”
Beijing’s heightened scrutiny is spurring fears of a broader crackdown on the country’s largest firms.
Yesterday, shares in No. 3 Internet company Meituan Dianping (美團點評) plunged as much as 7.4 percent after the state-run People’s Daily published an editorial slamming the industry’s preoccupation with growing traffic and volumes in areas such as grocery delivery, at the expense of real scientific innovation.
Alibaba had led a US$2.6 billion buyout of Intime as part of efforts to develop new business models that combine e-commerce with brick-and-mortar retailing.
China Literature agreed in 2018 to buy New Classics Media (新麗傳媒) for as much as 15.5 billion yuan to expand in filmed content.
The companies had failed to seek approval for the deals, which are not deemed anti-competitive, the antitrust regulator said.
Alibaba and Tencent representatives did not immediately respond to requests for comment.
Huya in October agreed to buy DouYu in an all-share deal and Tencent, which owns stakes in both companies, was expected to hold about 68 percent of the merged business’s voting shares.
That would have given it control over the leader in the livestreamed gaming market, estimated to generate 23.6 billion yuan in revenue this year, according to iResearch.
An affiliate of SF Holding Co (順豐控股) was also fined for not declaring a takeover of a competitor, the statement showed.
“Despite its relatively modest amount, the penalty announced today has a symbolic importance,” said Scott Yu (余昕剛), an antitrust lawyer with Beijing-based Zhong Lun Law Firm (中倫律師事務所). “The announcement, together with the draft antitrust guidance unveiled in November, signals that Beijing will pay close attention to the monopolistic status of Chinese internet companies.”
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