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China’s new anti-monopoly bureau fines major tech enterprises for M&A deals

Written by Mengyuan Ge Published on     3 mins read

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The mergers and acquisitions took place as early as nine years ago.

Alibaba, Tencent, Baidu, and other major tech giants were fined for acquiring smaller companies without seeking official approval in advance. The fines were insignificant relative to the companies’ cashflows, but served as warnings as China tightens control to mitigate monopolistic business practices, especially in the tech sector.

The companies were fined RMB 500,000 (USD 78,300) each, serving as punishment for 43 deals dating as far back as 2012, China’s top market regulator announced in a statement on Saturday. Among them, 13 cases pointed to Tencent and 11 cases involved Alibaba, suggesting the respective fine for each of these two companies has exceeded RMB 5 million (USD 783,000).

Other firms that were slapped with penalties include Baidu, JD.com, ride platform operator Didi Chuxing, Meituan, and TikTok owner Bytedance.

The penalty for gun jumping—unlawful coordination before a merger—is capped at RMB 500,000. “The fines are insignificant relative to the multibillion-dollar giants. There is no impact on their business,” Liu Xu, a researcher with the National Strategy Institute of Tsinghua University, told KrASIA.

“The cases announced this time are all transactions that should have been declared in the past but were not,” the State Administration of Market Regulation, or SAMR, said. However, the regulator fined companies with lighter penalties because their violations did not “constitute exclusivity and restriction on competition,” the SAMR said.

“All deals were approved unconditionally,” said Liu. “The SAMR did not disclose its research related to the competitive environment in the relevant sectors, the market share of the enterprises that have implemented operational consolidation, or the possible impact on the market’s competitive landscape if the deal is approved.”

Liu referred to a notable example cited by the SAMR—Alibaba’s purchase of Chinese delivery company Ele.me in 2019, following the merger between Ele.me and Baidu Takeaway in 2018. The two acquisitions have made the Chinese takeout delivery market a duopoly involving Ele.me and Tencent-backed Meituan.

The SAMR published specific guidelines on the country’s anti-monopoly law in early 2021 and has fined a cluster of internet giants over the last several months. Monopolistic behaviors include engaging in M&As without seeking regulatory approval in advance, and abusing dominant market positions to coerce merchants into opting out of competitors’ services.

“The fines serve as warnings to internet companies to comply with their legal obligations. They have professional legal teams but failed to take the initiative to report to the regulator, which impacted the industry for the worse. Therefore, we decided to impose the maximum penalty within the scope of the law,” a representative of the SAMR told journalists at a press conference in December 2020, after it issued a fine of RMB 500,000 (USD 78,300) to Alibaba, Tencent, SF Holding, and their counterparties for failing to report acquisitions of smaller competitors to the regulator.

Last month, a draft amendment of China’s Anti-Monopoly Law was submitted to the Standing Committee of the National People’s Congress for a first reading. The draft amendment increased the penalty cap tenfold to RMB 5 million (USD 783,000) for failing to report M&As to the regulator, even if the deal does not violate antitrust rules. The amendment is expected to be implemented beginning in 2022.

Last week, China set up a new national anti-monopoly bureau in Beijing, aiming to strengthen supervision on major enterprises in the country. Gan Lin, deputy minister of the SAMR, was appointed as the new bureau’s first head.

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