Chinese regulators imposed antitrust-related fines on three acquisition deals involving Alibaba, Tencent, and SF Express on Monday, in a sign of increasing concern about monopolistic behavior by internet giants.
Why it matters: The actions are fresh signs that Beijing is tightening its grip on internet firms, which once enjoyed a relatively lax regulatory environment. Officials have recently stepped up scrutiny on data security and content moderation. Regulators, meanwhile, have proposed stricter antitrust rules aimed at internet firms.
Details: The State Administration of Market Regulation (SAMR) said Monday it had decided to fine e-commerce giant Alibaba, Tencent-backed China Literature, and an SF Logistics-backed logistics firm for failing to report past acquisition deals properly to the regulator for antitrust reviews. Each is being fined about RMB 500,000 (around $76,410). It is not clear if regulators intend to pursue further action on these deals.
- Penalties for such behavior include reversing the deal or a fine of up to RMB 500,000, according to China’s Anti-Monopoly Law, which first took effect in 2008.
- The three deals involved were Alibaba’s 2017 acquisition of Intime, a retail firm; China Literature’s acquisition of New Classics Media, a television series studio, in 2018; and the acquisition of China Post Smart Logistics by Hive Box, a logistics firm backed by parcel giant SF Express.
- While the fines are trivial for companies involved, regulators warned that they plan to scrutinize more internet firms. “The internet industry is not a lawless domain for antitrust, and all companies should strictly comply with antitrust laws and rules,” a SAMR spokesperson said in a press conference (in Chinese) on Monday.
- Hive Box has said the company “sincerely accepts” the fine, according to local media. Both China Literature and Alibaba said they would “actively rectify and reform” to meet the regulator’s demands.
The next shoe to drop? SAMR said during the press conference that it is also looking into a merger agreement between gaming streaming platforms Huya and Douyu announced in October and planned to close in 2021. Both firms are backed by Tencent.
- Huya said it had previously reported the merger deal to the SAMR and that the company would “give active cooperation to” the authorities (Links in Chinese).
Context: China has this year tightened antitrust oversights on internet firms. In November, SAMR proposed new rules that could pave the way for antitrust authorities to launch more such probes into internet firms.
- The new rules widened the reach of certain antitrust terms that previously only applied to the physical economy. One example was the definition of “relative market,” in which players may pose a “dominant position” if they control more than 50% of the market and thus fell under the jurisdiction of China’s Anti-Monopoly Law.
- Legal experts have long criticized the 2008 law because it was designed to regulate companies in traditional industries and in most cases did not apply to companies operating on the internet, an increasingly important segment of the country’s economy.
- The new rules expanded the parameters for determining market share to include factors such as transaction volume, user base, and page views.
- A draft revision of the Anti-Monopoly Law unveiled in January, also announced by SAMR, included similar provisions.