China’s technology giants are expecting increasing investigations and fines following Alibaba’s record $ 2.8 billion fine on Saturday for antitrust violations.
Employees at Tencent Music and Meituan are concerned that they could target the next competition regulators in Beijing, which has intensified their investigation into transactions and restrictive practices in the once lightly regulated technology sector.
Unlike the antitrust investigation into Alibaba’s e-commerce practices, an antitrust investigation into social media giant Tencent would be more complicated, said an official in Shenzhen, who oversees technology ventures.
Such an investigation could cover their gambling industry, music licenses, online loans and their M&A empire, the official added. Of all China’s non-financial companies, Tencent invested the most in new ventures last year.
Last month, Tencent said it would seek a meeting with monopolistic regulators, which had previously fined them for not proactively seeking approval for previous acquisitions.
Tencent Music, Tencent’s joint venture with Spotify, is also preparing to face an antitrust inquiry into their licensing transactions, and as a result has deliberately waived some transactions in recent months, four employees in the unit said.
The official added that the investigation could also investigate the way in which Tencent’s WeChat social media platform – so prevalent in China that users frequently call ‘public aids’, blocks the loading of competitors’ links, Alibaba’s Taobao and a short video platform . Douyin. Tencent maintains that this is a consequence of their general policy that protects users from certain third-party links, and that competing platforms may offer their own WeChat channels.
However, the official acknowledged that Tencent has many strategies to avoid the worst problems. “Tencent’s guys with the government are really good. Accepting some fines is just a gesture to show your obedience. ‘
Earlier in March, the state administration for market regulation fined Alibaba, Tencent and lifestyle services group Meituan along with e-commerce platform Pinduoduo and service Didi for ‘improper pricing behavior’ in their grocery discount schemes.
A Meituan employee who bought in the grocery unit in March, who received the fine of Rmb1.5 million, said he believes Meituan is now just waiting to be fined again.
“To be honest, I think there is nothing we can do to prepare for regulation,” he said.
‘I do not think [a new fine] will have a big impact. We were all fined [in March]. Then we move on. . . There is no change in our product industry and strategies, ”the employee added. Meituan declined to comment.
These fines, which are plagued by bumper income from home buyers, would have caused little financial pain for China’s technology giants, and Alibaba’s record fine was at 4 percent of its 2019 revenue, but the increased investigation could cause a change in the groups . ‘behavior,’ said Angela Zhang, a jurist and author of Exception of Chinese antitrust.
‘It’s a very dynamic process. Because of the power imbalance between the Chinese government and enterprises, these businesses will be more likely to bow to the government’s claim in China. This explains their high level of cooperation, or even preventative cooperation, ”Zhang said.
But, she added: “Chinese technology enterprises are incredibly adapted to China’s unique political and economic governance”.
Alibaba’s fine and the increase in fines over the past few months come as regulators in the EU and the UK propose new measures to curb US technology giants.
But while EU regulators have warned against breaking the technology giants, analysts point out that Chinese groups have previously worked successfully with the lobby over the country’s first antitrust guidelines, as they were watered down from the concepts previously circulated. Alibaba and Tencent have also appointed several former monopolistic officials over the years.
Although the long-term impact of the renewed antitrust project is unclear, it is certain in China that technology companies will at least act apologetically, as Alibaba did on Saturday.
‘Everyone with a clear mind will not self-regulate, you just pretend you do. Who would pay for the loss if you lost your competitive advantage because you regulated yourself and others did not? says the Meituan employee.
Additional reporting by Qianer Liu in Shenzhen and Nian Liu in Beijing