Ma Huateng, founder of China’s largest social media and video game company Tencent, met with government antitrust officials this month and is expected to face stricter antitrust regulatory investigations.
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On March 24, Tencent President Liu Zhiping said that he had met with relevant departments several times and had regular meetings with the government about anti-monopoly. Ma Huateng also responded for the first Time that he would actively cooperate with regulators to achieve compliance as much as possible and ensure long-term development.
According to Reuters, Ma requested a meeting with Gan Lin, deputy director of the State Administration of Market Regulation (SAMR), and other senior officials, and Wu Zhengguo, director of the anti-monopoly bureau, also participated in the meeting to express concerns about some of Tencent Holdings’ business operations and ask it to comply with anti-monopoly regulations.
Multiple sources familiar with the matter told Reuters that Tencent is expected to be the next Chinese company to see stricter regulation. The General Administration of Market Supervision and Administration is gathering information to investigate WeChat‘s monopolistic practices and how the App undermines fair competition and squeezes out smaller rivals.
Ma Huateng. (Public Domain)
Ma Huateng. (Public Domain)
“Ma Huateng is definitely a rabbit in the hat when he sees Jack Ma. I think the problem may be that WeChat Pay, with a total of 95 percent market share with AliPay, is outside of regulation.” Professor Xie Tian of the Aiken School of Business at South Carolina State University said, “The Chinese Communist Party is systematically and comprehensively stripping and raiding private companies of their property, and suppressing, if not completely taking over, Internet high-tech financial companies. The CCP itself is launching digital currencies and is definitely forcing a takeover on all e-commerce companies involved in online payments.”
According to the latest data, Tencent’s net profit nearly tripled to RMB 59.3 billion in October-December last year. 2020 annual revenue was RMB 482.064 billion, up 28% year-on-year, and net profit was RMB 159.85 billion.
On March 12, Tencent, Baidu and 12 other online companies involved in the illegal implementation of operator concentration were fined a total of RMB 6 million in administrative fines. Tencent’s share price fell heavily for two days in a row, and its equity investment transactions were not declared in accordance with the law, although they did not constitute a monopoly result that excluded or restricted competition.
According to financial analyst “Financial Cold Eye”, “Ma Huateng will definitely have an easier time passing the test, at most Tencent’s business level will do some splitting and rectification, unlike Ma Yun, who is very passive and in a difficult situation.”
He told the station that Tencent’s shareholders are not as deep as Alibaba’s involvement in politics, and that while Alibaba holds national security-related tools such as Alipay and media, Tencent is mainly involved in the entertainment industry such as games and videos.
Ma Huateng. (Public Domain)
Ma Huateng. (Public Domain)
“Ali has Xi Jinping‘s political enemies behind it, including Jiang Zemin and Jia Qinglin. Tencent’s stake seems a bit simpler than Ali’s, not so much politics involved. Ma is more of a political figure, including naysayers and dissatisfaction with regulators, and Ma is much more low-key and introspective.”
The listing of Alibaba’s Ant Group was urgently called off last year, and the Wall Street Journal revealed that Xi did not want to see Alibaba’s secret investors Jiang Zhicheng and Li Botan benefit from it.
As China’s largest video game and social media company, value-added services, including games, account for 55 percent of Tencent’s revenue, with financial technology and corporate services accounting for only 29 percent.
Photo: China’s Tencent founder Ma Huateng (Reuters)
Tencent’s dominant position in the gaming industry is coming under state intervention. According to Reuters news agency, Tencent is willing to accept conditional approval as regulators fear a merger of the two live-streaming companies, Tiger and Douyu, would allow Tencent to gain overwhelming dominance.
In the 12 years since China’s Anti-Monopoly Law was enacted, anti-monopoly enforcement agencies have not investigated cases of operator concentration in the Internet industry. It was not until the end of 2020 that China struck a series of punches for the first time against Internet super platforms, beating the drums of strong anti-monopoly regulation.
The Antitrust Guidelines for China’s platform economy also officially landed on February 8, but deleted key provisions such as relevant market definition and market dominance determination, and improved relevant remedies.
Ding Hongbin, a professor at Loyola University Maryland School of Business, believes that although the Guidelines make it more difficult for the government to identify Tencent’s monopolistic behavior, there is still a lot of subjective space for Chinese officials to judge.
“U.S. antitrust law is so well developed that it takes a lot of economists and lawyers to calculate your market and economic benefits, it really does. Tencent can try to convince the antitrust unit from the perspective of a national enterprise: Does China need to want a Tencent that is strong in the world, or a Tencent that is strong in China but weak in the world? It’s hard to do international competition if you insist on tearing me down.”
In fact, in China, Alibaba and Tencent, the private companies, are not the largest monopolies.
“The biggest monopoly in Chinese business is the state-owned enterprises. The Anti-Monopoly Law is just a stick for the CCP to offer up when it needs to crack down. Tencent is just a bigger, thicker leek.” Xie Tian said the socialist transformation of industry and commerce in the 1950s is making a comeback, with some cooperating, some jumping, and some being killed.
“What will Ma Huateng do next? He may avoid the state of Ma and take a more subservient approach.”
Topped by common anti-monopoly pressure, Tencent and Alibaba’s different trading platforms are showing ice-breaking signals after years of mutual blocking. Alibaba plans to open a special version of its Taobao applet on WeChat, where Taobao merchants can accept WeChat payments in specific scenarios.
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