China Regulator Fines Tencent, Baidu, Others Over Investment Deals
March 12 2021 - 07:19AM
Dow Jones News
By Stephanie Yang and Jing Yang
TAIPEI -- China's antitrust regulator fined a dozen companies,
including Tencent Holdings Ltd. and Baidu Inc., over a number of
past investment deals, the latest sign of Beijing's broad crackdown
on the internet sector.
China's State Administration for Market Regulation said Friday
that the 12 companies didn't properly report past deals and fined
them each 500,000 yuan, or about $77,000. Though the fine is
relatively small given the size of the companies being punished,
antitrust experts said the move serves as the latest reminder that
authorities are intensifying scrutiny over China's powerful tech
giants.
Friday's announcement follows a wave of fines and investigations
into alleged monopolistic practices, including a continuing probe
into Alibaba Group Holding Ltd., China's biggest e-commerce firm,
over whether it abused its dominant market position.
They also follow similar fines imposed on Tencent and Alibaba in
December for failing to properly report past acquisitions.
Observers had viewed those previous penalties as a sign that
Chinese regulators were tightening control over tech companies with
offshore corporate structures, and plugging loopholes that allowed
Chinese tech giants to pursue investments without regulatory
oversight.
Many Chinese tech companies are registered in offshore tax
havens to receive funding from foreign investors. Such a structure,
known as a variable interest entity, has been a gray area under
Chinese law. Until recently it was unclear if antitrust regulations
applied to companies structured this way.
In recent months, as China stepped up efforts in taming big-tech
platforms, authorities moved to plug this loophole by bringing
enforcement actions retroactively. Since then, some companies have
been reporting past deals to authorities, people familiar with the
matter say.
James Gong, a Beijing-based lawyer with Herbert Smith Freehills,
said that while the fines were modest in size, they showed
authorities are taking a sterner approach to regulating China's
tech sector.
"Antimonopoly laws for now will be reinforced more intensively,"
Mr. Gong said. "Previously, this was an area that authorities had
taken a more laid-back attitude toward."
Those fined Friday involved many of China's biggest internet
companies or their subsidiaries. They included an
Alibaba-controlled store- and mall-operator called Intime Retail
(Group) Co., an investment branch of JD.com Inc., Chengdu
Meigengmei Information Technology Co. -- an investment company
controlled by delivery giant Meituan -- as well as a subsidiary of
ByteDance Ltd., owner of the popular short-video app TikTok.
Chinese ride-hailing giant Didi Chuxing Technology Co. and
Japanese tech investor Softbank Corp. were also fined for failing
to report a joint venture that they had formed in Japan in 2018,
the regulator said. Didi and SoftBank declined to comment.
Tencent said it would "continue to adapt to changes in the
regulatory environment and will seek to ensure full compliance."
Bytedance said the joint venture established by its unit involved
in the fined deals was never in operation and had been canceled in
January.
Alibaba, Baidu, JD, Meituan and TAL didn't respond to requests
for comment.
--Yifan Wang and Raffaele Huang contributed to this article.
(END) Dow Jones Newswires
March 12, 2021 08:04 ET (13:04 GMT)
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