The Chinese government is trying to contain the power of some of China's most influential internet companies. The country's top market regulator announced Monday that it had fined Alibaba and China Literature, Tencent's e-book spin-off, for failing to report their previous acquisition deals for clearance.
The cases concern Alibaba's stakes in the large Chinese shopping center Intown and the acquisition of the film studio New Classics Media by China Literature. The companies will be fined 500,000 yuan ($ 76,000) each, according to the announcement. Although the sum is meager compared to the size of the companies' billions in business, the penalty is likely to alarm other industry players, a spokesman for the market regulator said at a press conference.
Alibaba has expanded into offline retail in recent years, in part through aggressive acquisitions. Tencent, which has built a digital entertainment empire, has also invested in outside partners to expand its territory.
The companies did not apply for regulatory approval, although no deal was viewed as "excluding or restricting market competition". As such, the market authority ordered a fine instead of dissolution under China's antitrust laws, it said.
According to China Literature, the official order to comply with compliance and clearance requirements is strictly adhered to. Alibaba cannot be reached immediately for comment.
The merger of game streaming giants Huya and Douyu, both backed by Tencent, is also under investigation by antitrust authorities.
The Alibaba and China Literature cases mark the first time China has fined companies structured as "floating rate companies" for violating market concentration. The VIE corporate structure is popular with Chinese Internet companies because they can act as domestic firms controlled by foreign companies. However, the establishment is controversial as it has allowed companies to find regulatory loopholes.
The Chinese antitrust law, which has been publicly commented on since January, is currently being revised, the market regulator announced at the press event. Last month the government presented a series of draft regulations specifically aimed at monopoly behavior by Internet companies. However, the regulations are likely to be complicated, as industry experts have found.
… Stop these BigCos when they clearly offer many advantages, and geopolitical realities make things very complicated. Are the platforms in China more regulated? Yes. Will they split up? Doesn't it look like things are going in that direction yet? /The End
– Rui Ma 马 睿 (@ruima) November 16, 2020