The Chinese State Administration for Market Regulation on Friday fined some of its largest tech giants, including Tencent Holdings Ltd (騰訊), Baidu Inc (百度), ByteDance Ltd (字節跳動) and Didi Chuxing (滴滴出行), for past acquisitions and investments as it stepped up its crackdown on the sector.
Pony Ma’s (馬化騰) Tencent is being fined 500,000 yuan (US$77,000) for its 2018 investment in online education app Yuanfudao, the agency in a statement.
Baidu was fined the same amount for its 2014 takeover of Ainemo Inc, a maker of consumer electronics including voice-controlled speakers.
Photo: Reuters
The firms are being sanctioned for not seeking prior approvals for the deals — a breach of China’s anti-monopoly laws — although the agency determined that the deals themselves were not anti-competitive.
Tencent and Baidu join fellow behemoth Alibaba Group Holding Ltd (阿里巴巴) in coming under fire from the regulator, as Beijing steps up efforts to rein in its once free-wheeling technology industry.
The regulator last year issued fines against Alibaba and Tencent unit China Literature Ltd (閱文集團) for similar breaches.
“The message is clear that seeking government approvals in deals like these are a must,” said Ye Han (葉涵), a partner at Beijing-based law firm Merits & Tree, who specializes in antitrust and mergers and acquisitions.
“While we haven’t seen cases where companies got broke up or mergers got unwinded, such evaluations are likely going on behind the scene,” Ye said.
Didi Mobility Pte (滴滴移動), a unit of ridehailing giant Didi Chuxing, and Japan’s SoftBank Corp were also issued fines of 500,000 yuan each — the maximum penalty possible — for setting up a joint venture without permission.
A ByteDance unit and its partner Shanghai Dongfang Newspaper Co were also penalized the same amounts for a 2019 partnership that created a video-copyright venture.
ByteDance said that the joint venture has since been canceled.
Technology companies such as Tencent had previously carried out mega mergers and acquisitions through so-called variable interest entity structures, which operate on shaky legal grounds.
The new antitrust rules, accompanied by the fines handed down by the regulators, are a signal that the structures are now under their oversight.
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