Chinese Tech Giant Tencent Latest Victim of Beijing’s ‘Anti-Monopoly’ Crack Down

Visitors use their smartphones underneath the logo of Tencent at the Global Mobile Internet Conference in Beijing May 6, 2014. (Reuters/Kim Kyung-Hoon)

Chinese tech giants continue to face scrutiny from Beijing. One of the world’s top ten largest companies, Chinese internet giant Tencent, was recently fined and given 30 days to give up its exclusive rights to music streaming.

On July 24, the official website of the Chinese State Administration for Market Regulation reported that Tencent’s July 2016 acquisition of China Music Group equity transaction constituted an illegal implementation of “Concentration of Business Operators.” The bureau ordered Tencent to terminate the exclusive music copyright within 30 days and required the tech giant to submit an annual performance report for the next 3 years. Tencent was also fined 500,000 yuan ($75,000).

In an exclusive report on July 12, Reuters quoted two insiders as saying that the Chinese Communist Party (CCP) has required the music streaming media company controlled by Tencent to give up their exclusive streaming rights, otherwise it might face a fine of at least 10 billion yuan ($1.5 billion). If Tencent agrees to give up the copyright, the fine would be reduced to 500,000 yuan ($75,000).

Tencent acquired 61.64 percent of China Music Group shares on July 12, 2016, gaining control of the company. In December 2016, the now integrated China Music Group was renamed Tencent Music Entertainment Group. The registration procedures were completed with the final transaction on Dec. 6, 2017.

The penalty document states that when the merge occurred in July 2016, the monthly number of active users of Tencent and China Music Group were 160 million and 230 million, respectively, with market shares of 33.96 percent and 49.07 percent, respectively. The monthly user time was 805 million hours and 698 million hours, with market shares of 45.77 percent and 39.65 percent, respectively. Together they held a total market share of more than 80 percent.

The document further states that Tencent has obtained a higher market share by merging with major competitors in the market; the streaming service now owns more than 80 percent of the Chinese market share, which has, or may have, the effect of eliminating or restricting competition in the market.

Power Struggle Within the CCP

Recently, Beijing has used its “anti-monopoly law” to crack down on several large technology companies, including Alibaba, Tencent, and Baidu. The most extreme punishment meted out on April 10 was against Alibaba Group, which was fined 18.228 billion yuan ($2.73 billion).

Tencent has been fined three times, in a total of nine cases, with penalties accumulating to 4.5 million yuan (approx. $675,000).

In response to the CCP’s crackdown on Chinese tech giants, Li Yanming, a current political commentator in the United States and an expert on China issues, said in an interview with The Epoch Times that from an outsider’s perspective, the recent blows dealt by Beijing seem dizzying at first. Behind the scenes, however, are the CCP’s internal struggles.

The companies being hit by the authorities are all companies supported by former Party leader Jiang Zemin. Tencent’s development and growth began during the Jiang Zemin era, and it is closely connected with Jiang’s powerful political and business interest groups.