China fines Alibaba, Tencent’s e-book subsidiary for antitrust violations – TechCrunch


The Chinese government is preparing to restrict the power of some of China’s most influential internet companies. The country’s leading market regulator announcement On Monday, he fined Alibaba and China Literature, Tencent’s e-book spin-off, for failing to report their past acquisition agreements for clearance.

The cases relate to Alibaba’s equity stake in the large Chinese shopping center operator Intown and the acquisition by China Literature of the New Classics Media film studio. The companies are each liable to a fine of 500,000 yuan ($ 76,000), according to the notice. Although a paltry amount compared to the companies’ multibillion-dollar transaction size, the penalty should ring alarm bells for other industry players, a spokesperson for the market regulator noted at a press conference.

In recent years, Alibaba has expanded into offline retail, in part through aggressive acquisitions. Tencent, which has built a digital entertainment empire, has also invested in outside partners to help expand its territory.

The companies did not seek regulatory clearance, although neither of the two agreements was considered to “exclude or restrict competition in the market“. As such, the market authority ordered a fine rather than a dissolution in accordance with China’s antitrust laws, he said.

China Literature says it strictly follows the regulatory order to work on compliance and authorization requirements. Alibaba cannot be immediately reached for comment.

The merger between game streaming giants Huya and Douyu, both backed by Tencent, is also under investigation by the antitrust regulator.

The Alibaba and China Literature cases mark the first time that China has fined companies structured as “variable interest entities” for violations of market concentration. The VIE business structure is popular among Chinese internet companies because it allows them to operate as domestic companies controlled by foreign entities, but the setup is controversial because it allowed companies to find regulatory loopholes.

China’s antitrust law, which began soliciting public comment in January, is currently under review, the market regulator said at the press conference. Last month, the government unveiled a set of draft rules specifically targeting the monopoly behavior of internet companies, though the regulations are expected to be complicated, as industry experts have noted.

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