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China’s market regulator fines Tencent, Alibaba, others for M&A deals

Written by Jiaxing Li Published on     2 mins read

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The government will tighten supervision on platform companies in 2022, a regulatory official said.

China’s top market regulator said on Wednesday that it has fined Tencent, Alibaba, JD.com, and Bilibili for failing to report 13 merger deals to authorities in advance, signaling that China continues to intensify its regulatory crackdown targeting major tech conglomerates.

The State Administration for Market Regulation (SAMR) cited 13 cases dating back to 2015, each carrying a fine of RMB 500,000 (USD 78,700). Tencent was involved in nine deals and received a total fine of RMB 4.5 million (USD 710,000). Alibaba was fined for two deals that violated China’s antitrust law, and JD.com and Bilibili were each penalized for one merger.

All four internet companies were punished for failing to report the deals beforehand, but the deals did not restrict competition, SAMR said in the public filings.

According to China’s antitrust law, companies must seek official approval before a merger or acquisition deal when the combined annual revenue of all entities involved is at least RMB 10 billion (USD 1.57 billion), and at least two entities have at least RMB 400 million (USD 62.7 million) in annual revenue.

The move is part of China’s ongoing regulatory campaign against the tech industry. In early 2021, the State Council published a lengthy set of guidelines on anti-monopoly regulations targeting platform companies, and fined some of the most prominent internet firms in the following months.

Alibaba had to pay a record RMB 18.2 billion (USD 2.8 billion) fine in April 2021 for abusing China’s online retail market based on its dominant market share. The Tencent-orchestrated merger of Huya and Douyu, two of China’s largest video game streaming platforms, was blocked in July 2021 due to antitrust concerns. In November 2021, SAMR issued 43 fines to major tech companies in one go for failing to report M&A deals.

The market regulator reported a total of 118 antitrust cases in 2021, with accumulated fines exceeding RMB 20 billion (USD billion) and 89 involving internet giants, according to data compiled by Chinese media TMT Post.

There is no specific time limit for the SAMR to initiate investigations. One of the earliest deals probed by the regulator took place in 2011, when Tencent acquired 10% of software developer Cheetah Mobile’s without seeking official approval.

China’s internet sector will likely face an even more stringent regulatory environment this year. In November 2021, regulators proposed several amendments to the anti-monopoly law, which increased the penalty cap for violations. The proposal is currently under review. An anti-monopoly bureau affiliated with SAMR was set up in the same month.

SAMR will tighten supervision in areas including the platform economy, technological innovation, and information security, head of the regulatory body Zhang Gong said in an interview with state news agency Xinhua on Dec 29, 2021.

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