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December 15, 2020

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Internet giants fined, face increased scrutiny

CHINA warned its Internet giants yesterday that it would not tolerate monopolistic practices and to brace for increased scrutiny, as it slapped fines and announced probes into deals involving Alibaba Group and Tencent Holdings.

The State Administration of Market Regulation said it would fine Alibaba Investment Ltd, an affiliate of Alibaba Group, Tencent-owned China Literature Ltd and Shenzhen Hive Box Technology Co 500,000 yuan (US$76,464) each, the maximum under a 2008 anti-monopoly law, for not reporting past deals properly for anti-trust reviews.

It said it would also look into a merger between game livestreaming firms Huya Inc and DouYu International announced in October. Tencent is a major investor in both and the Chinese tech giant would have controlled 67.5 percent of voting shares in the merged business.

In addition, the administration said it will review and investigate other deals based on tip-offs that some firms had cornered a lot of operating power in certain sectors.

“The fines for the three cases are a signal to society that anti-monopoly supervision in the Internet field will be strengthened,” the administration said even as it acknowledged the fines were relatively small. “The Internet industry is not outside the oversight of anti-monopoly law,” it added in a separate statement.

China Literature said it had received administration’s notice and would carry out relevant compliance work. Alibaba and Tencent did not immediately respond to requests for comment.

This is the first time that China has fined any Internet company for violating the 2008 anti-monopoly law by not properly reported deals for anti-trust vetting. The administration warned that companies should not adopt a “wait-and-see” attitude before reporting deals, saying some had failed to do so even after reminders.

Last month, China released draft regulations to clamp down on anti-competitive practices in the industry, such as signing exclusive agreements with merchants and the use of subsidies to squeeze out competitors. A politburo meeting chaired by President Xi Jinping said last Friday that Beijing would step up its anti-trust efforts.

Alibaba’s financial affiliate Ant Group, founded by billionaire Jack Ma, has been a target of the heightened scrutiny. Its US$37 billion listing, scheduled to be the world’s largest, was abruptly halted last month after regulators warned its online lending business faced tighter scrutiny. The deals the administration fined yesterday include Alibaba’s increasing its stake in department store company Intime Retail Group to 73.79 percent in 2017 without seeking approval.

Online publisher and e-book company China Literature was fined for failing to report its 2018 New Classics Media acquisition. Shenzhen Hive Box, whose backers include logistics giant SF Holding Co, was rapped for its acquisition of China Post Smart Logistics.

While the 2008 anti-monopoly law allows the regulator to split up businesses, the administration said it had decided against breaking up these three deals as they did not eliminate or restrict competition and regaining the previous status would have a major impact on the companies’ operations and the economy.



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