China punishes internet giant Tencent in antitrust blitz: Report | Music News

China is preparing a large fine for Tencent Holdings as part of a reduction in the country’s antitrust on Internet giants, but is likely to face a $ 2.75 billion fine imposed on Alibaba this month, two people with direct knowledge of the matter said.

Tencent should expect a penalty of at least 10 trillion yuan ($ 1.54 billion), which is significant enough for the State Market Regulation Administration (SAMR) to be an example of this, the two people said.

Tencent faces penalties for not reporting past purchases and investments for antitrust reviews, a fine of 500,000 yuan ($ 77,100) per case, and anti-competitive practices in some businesses, particularly music reproduction. .

Neither SAMR nor Tencent responded immediately to Reuters’ requests for comment.

“The attitude of the regulator is that unlike Alibaba you are not the biggest target here, but it would be impossible not to penalize Tencent when the campaign is underway,” people said.

China has sought to reduce the economic and social power of the internet giants, which it once regulated little in recent months, in a curtailment backed by President Xi Jinping.

Tencent and Alibaba Group Holding Ltd are China’s two largest technology conglomerates, with market values ​​of $ 776,000 and $ 642 million, respectively.

Earlier this month, SAMR imposed a fine on Alibaba after an investigation found that the e-commerce company had abused its main position in its market for several years.

Tencent’s broad businesses include video games, content playback, social media, advertising, and cloud services.

SAMR’s research is based in part on the Tencent Music Entertainment Group, which was listed and listed in the United States in late 2018, according to two business sources and other sources. Tencent Music Entertainment did not immediately respond to a request for comment.

Stifling streaming

People said the regulator informed Tencent that it would expect a fine, leave exclusive music rights and even force it to sell the Kuwo and Kugou music apps it bought.

However, it’s likely that Tencent’s main business, video games and WeChat, will continue intact, one person said.

Tencent Music, China’s response to Spotify, acquired competitors ’Kugou and Kuwo apps in 2016, and secured exclusive streaming rights with record labels such as Universal Music Group, Sony Music Group and Warner Music Group Corp.

He then licensed some of the competitors ’rights, including NetEase Cloud Music, and complained that the deal was unfair and prices were high.

SAMR launched an investigation against Tencent Music in 2018, but suspended it in 2019 after three years after the company agreed to stop renewing some exclusive rights that normally expire, the two sources previously told Reuters.

However, he retained the exclusive rights to Jay Chou, the most influential Chinese-speaking pop star in the world, using NetEase Cloud Music and Alibaba-sponsored Xiami Music as competitors against smaller opponents.

Looking at the musician

SAMR has told Tencent Music it expects to waive some other exclusive rights, the two people said.

It may have to be sold to competitors Kugou and Kuwo or other investors, one of the options proposed to senior Beijing government officials, the three sources said.

Mandatory sales of these units would create a precedent and are difficult to execute, two of which have been warned.

People have said that the final confirmation of Tencent’s sanction will have to make a gesture to the Chinese general management.

They added that Tencent is pushing for a lighter penalty.

“Tencent doesn’t mind paying a hefty fine and is willing to pay more if necessary if its core business is kept intact,” one person said, referring to its video game and WeChat application units.

Last month, Reuters reported that Tencent will have to meet certain requirements in its plan to merge Huya and Douyu, including two major video game streaming platforms, including providing exclusivity for streaming Tencent games to competing streaming sites.

SAMR said this week that Tencent-sponsored Meituan is investigating food delivery giants for claims that forced sellers to use only their platform because of the same crime punishable by Alibaba.