China to fine Tencent in anti-trust crackdown on conglomerates, Reuters reported

China is preparing to penalize Tencent Holdings Ltd as part of the antitrust crackdown on the country’s internet giants, Reuters reported citing people familiar with the matter.

Sources told Reuters that Tencent should expect a penalty of at least 10 billion yuan ($1.54 billion), less than what the Chinese authority fined Alibaba, but considerable enough for the State Administration of Market Regulation (SAMR) to set an example.

Earlier this month, the government imposed a fine of a record $2.75 billion on Alibaba for breaking anti-monopoly law.

The report said SAMR would penalize Tencent for not reporting past acquisitions and investments accurately, for which the fine is capped at 500,000 yuan per offense.

SAMR’s investigation partially focuses on monopolistic practices in some of its businesses, particularly its music streaming business, Tencent Music Entertainment Group, which was spun off and listed in the NYSE in late 2018.

Sources told Reuters that the Chinese regulator has informed Tencent to give up exclusive music rights and may even be forced to sell the acquired Kuwo and Kugou music apps, along with the fine.

“The attitude from the regulator is that, unlike Alibaba, you are not the biggest target here, but it would be impossible not to penalize Tencent now that the campaign is in action,” one of the sources told Reuters.

SAMR launched an investigation into Tencent Music in 2018. After the company agreed to stop renewing some of the exclusive rights, the regulator dropped the charge in 2019, sources said.

Tencent Holdings and Alibaba Group Holding are two of China’s most giant tech conglomerates, with market values of $776 billion and $642 billion, respectively.

Picture Credit: FT