China's antitrust regulator fines tech giants, may slap record penalty on Alibaba

SHANGHAI • The antitrust regulator in China has fined some of the country's tech giants, including Tencent Holdings, Baidu and ByteDance, and is said to be considering levying a record penalty on Alibaba Group Holding as it steps up its crackdown on the sector.

Tencent is being fined 500,000 yuan (S$103,000) for its 2018 investment in online education app Yuanfudao, according to a statement by the State Administration for Market Regulation yesterday. Baidu was fined the same amount for its 2014 takeover of Ainemo, a maker of consumer electronics including voice-controlled speakers.

The firms are being censured for not seeking prior approvals for the deals - a violation of country's anti-monopoly laws - though the regulator had determined the deals themselves are not anti-competitive.

On Thursday, the Wall Street Journal reported that China's State Administration for Market Regulation is considering a fine on Alibaba that may surpass the US$975 million (S$1.3 billion) Qualcomm paid in 2015 over anti-competitive practices. The regulator is also considering whether the Chinese e-commerce giant should divest some assets unrelated to its main online retailing business.

Alibaba declined to respond to a Reuters request for comment.

Founder Jack Ma's business empire has been put under intense scrutiny by Chinese regulators following his stinging criticism of China's regulatory system in late October. The authorities in Beijing halted a planned US$37 billion initial public offering from Ant Group, Alibaba's Internet finance arm.

The company has come under fire in the past from rivals and sellers for allegedly forbidding its merchants from listing on other e-commerce platforms, a practice known as "two-choose-one".

Beijing has been stepping up efforts to rein in its once free-wheeling technology industry. The regulator had last year issued fines against Alibaba as well as Tencent unit China Literature for similar violations.

"The message is clear that seeking government approvals in deals like these are a must," said Mr Ye Han, a partner at Beijing-based law firm Merits & Tree. "While we haven't seen cases where companies got broke up or mergers got unwound, such evaluations are likely going on behind the scene."

Didi Mobility, a unit of ride-hailing giant Didi Chuxing, and Japan's SoftBank 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 were also penalised the same amounts for a 2019 partnership that created a video-copyright venture. ByteDance said the joint venture has since been cancelled.

Technology companies like Tencent had previously carried out mega mergers and acquisitions through so-called Variable Interest Entity (VIE) structures, which operate on shaky legal grounds. The new antitrust rules, accompanied by the fines handed down by the regulators, are a signal VIEs are now under their oversight.

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on March 13, 2021, with the headline 'China's antitrust regulator fines tech giants, may slap record penalty on Alibaba'. Subscribe