China’s anti-trust regulator fined 12 large technology companies including Tencent, Baidu, ByteDance and Didi Chuxing for past acquisitions and investments as it stepped up its crackdown on the sector.
Tencent is being fined $77,000 for its 2018 investment in online education app Yuanfudao, according to a statement by the state administration for market regulation on Friday. 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 aren’t anti-competitive.
Tencent and Baidu join fellow behemoth Alibaba Group in coming under fire from the country’s powerful anti-trust regulator, as Beijing steps up efforts to rein in its once free-wheeling technology industry.
“The message is clear that seeking government approvals in deals like these are a must,” said Ye Han, a partner at Beijing-based law firm Merits & Tree, who specializes in anti-trust.
“While we haven’t seen cases where companies got broke up or mergers got unwinded, 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 $77,000 for setting up a joint venture without permission.
A ByteDance unit and its partner Shanghai Dongfang Newspaper were also penalized 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 anti-trust rules, accompanied by the fines handed down by the regulators, are a signal VIEs are now under their oversight.
Tencent’s ability to strengthen its domestic ecosystem through mergers and acquisitions may be significantly weakened on rising anti-monopoly scrutiny, underlined by a 500,000 yuan fine.