After Alibaba received a record $2.8 billion fine, employees of rivals such as Tencent Music and Meituan fear their companies will be the next target of regulators.
After Alibaba (Alibaba) received a record $2.8 billion fine on Saturday for violating antitrust laws, Chinese tech giants are expecting stronger scrutiny and penalties of their own.
Employees at Tencent Music and Meituan fear that competition regulators in Beijing are now bolder and could target them next. Competition regulators have recently stepped up scrutiny of M&A deals and anti-competitive behavior in China’s once-loosely regulated technology sector.
Unlike the anti-monopoly investigation into Alibaba’s e-commerce practices, launching an anti-monopoly investigation into social media giant Tencent will be more complicated, said an official in Shenzhen who oversees technology companies.
The officials added that the ripple effects of such an investigation could cover the group’s gaming business, music rights licensing, online loans and M&A empire. Tencent made the most investments in startups last year of any non-financial company in mainland China.
Tencent said last month that it has sought meetings with antitrust regulators. The move comes after the group was fined by regulators for failing to proactively seek approval for previous acquisition deals.
Tencent Music is a joint venture between Tencent and Spotify. Tencent Music has also been preparing for an antitrust investigation into its licensing deals, and has deliberately abandoned some deals in recent months as a result, according to four of its employees.
The officials added that such an investigation could also look into how Tencent’s WeChat social media platform – so dominant in China that it is often referred to by users as a “public utility” – prevents rivals such as Alibaba from loading the service. –how it blocks the loading of links from competitors such as Alibaba’s Taobao and short-video platform Douyin. Tencent insists that this is a result of its general policy of protecting users from certain third-party links, and that the group allows rival platforms to open their own WeChat channels.
The official acknowledged, however, that Tencent has a number of strategies to avoid the worst of the trouble. “Tencent’s government relations experts are really good at what they do. Accepting some penalties is just a gesture to show that you obey.”
Earlier in March, the State Administration of Market Regulation (SAMR) fined Alibaba, Tencent and lifestyle services group Meituan, as well as e-commerce platform Pinduoduo and ride-hailing service Didi, for “improper pricing practices” in their discounted fresh food group buying programs. The company’s fresh food group buying division, Meituan, was fined for “unfair pricing practices.
Meituan’s fresh food group buying division received a RMB 1.5 million fine in March. An employee in the department said he thinks Meituan is now just waiting to be fined again.
“Honestly, I don’t think there’s anything we can do right now in terms of preparing for regulatory action,” he said.
“I don’t think (the new fines) will have a significant impact. We were all fined (in March). And then we continued …… Our product business and strategy has not changed,” the above-mentioned employee added. Meituan declined to comment.
The fines won’t cause much financial pain for the Chinese tech giant, bolstered by the lucrative revenue generated by home-based shoppers. Alibaba, for example, has a record fine set based on 4 percent of 2019 revenue, but legal scholar Angela Zhang, author of “Chinese Antitrust Exceptionalism,” said increased scrutiny could lead to changes in the group’s behavior.
“It’s a very dynamic process. Because of the power imbalance between the Communist authorities and companies, these companies are more likely to give in to government demands in mainland China. This could explain the high level of cooperation, even proactive cooperation, from companies,” Zhang Huyue said.
But, she added, “technology companies in mainland China are very well adapted to China’s unique way of political and economic governance.”
As Alibaba receives sky-high fines and Communist Party regulators have increased penalties on tech companies in the past few months, EU and British regulators are proposing new measures to rein in the U.S. tech giant.
But while EU regulators have warned about splitting the tech giants, analysts have suggested that Communist Party tech groups previously lobbied successfully for the country’s first set of antitrust guidelines, which turned out to be weaker than the drafts initially circulated. Alibaba and Tencent have also employed a number of former antitrust officials over the years.
While the long-term impact of the new antitrust enforcement efforts is unclear, it’s safe to assume that in China, tech companies will at least apologize in public, as Alibaba did on Saturday.
“Everyone in their right mind doesn’t self-regulate, you just pretend you’re doing that. If you self-regulate when others don’t, and you end up losing your competitive edge, who’s going to pay for the loss?” The aforementioned Meituan employee said.
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