By Emmanuel Legrand
China's antitrust clampdown on tech companies could hit Tencent Holdings, a few weeks after regulators fined vending site Alibaba with a $2.75 billion penalty.
According to a report from Reuters, Tencent could be fined a minimum of 10 billion yuan ($1.54bn) by the State Administration of Market Regulation (SAMR).
Tencent faces penalties "for not properly reporting past acquisitions and investments for antitrust reviews," according to Reuters, which also cites sources saying that SAMR’s investigation partly focuses on Tencent Music Entertainment Group, singled out for anti-competitive practices.
Objections to licensing deals
Tencent Music controls 88% of the online music market in China and operates music streaming services QQ Music, Kugou Music and Kuwo Music.
SAMR regulators focus on two specific issues: the first one is the conditions under which it acquired Kuwo and Kugou in 2016, and the second is related to Tencent's exclusive licensing deals with Universal Music Group, Sony Music Groupand Warner Music Group. The content from the three majors was then sub-licensed to other platforms such as NetEase Cloud Music.
However, NetEase complained that the terms of the arrangement were unfair, prompting an initial probe by SAMR into Tencent's business practices in 2018. The case was dropped it in 2019 after Tencent put an end to its exclusive licensing deals and the three majors started to cut direct deals with NetEase and other platforms.
Selling streaming services
With regards to the acquisition of Kuwo and Kugou, the regulator has informed Tencent that it could even be forced to sell the two services. Reuters noted that a forced sale of those units would set a precedent and might be hard to execute.
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