China’s antitrust regulator is set to take over control of Tencent Holdings music streaming arm according to sources who know about the matter, as the imminent order will force Tencent Holdings Ltd to give up exclusive rights to its music labels.
Also, as a penalty for not properly flagging the acquisition of apps Kuwo and Kuguo, the company will be fined by the State Administration of Market Regulation (SAMR), a sum of 500,000 yuan ($77,150).
This move is, more or less, a punitive restriction to put in check the social and economic power of China’s internet giants. The crackdown of China’s once loosely regulated internet giants began late last year and has included a record 18 billion yuan fine on e-commerce firm Alibaba Group Holding Ltd for abusing its market position.
This development comes about forty-eight hours after the Chinese regulator announced that it was blocking Tencent’s merge with video game streaming platforms Huya and DouYu, the country’s biggest video game streaming services.
The plan to block the merger was first reported on Monday after the State Administration of Market Regulation (SAMR) reviewed additional concessions proposed by Tencent Holdings Ltd for the merger.
In reaction to the nullification of the merger, the company stated that it was ready to abide by the decision and comply with all regulatory requirements, and operate in accordance with applicable laws and regulations.
Tencent Music is China’s dominant music streamer and is the country’s equivalent to Spotify Technology. To get rid of competition, Tencent had been vying for exclusive streaming rights with labels such as Universal Music Group, Sony Music Group, and Warner Music Group Corp. This attracted the attention of the State Administration of Market Regulation (SAMR) in 2018, inciting an investigation.
The investigation was stopped after the company agreed not to renew some of its exclusive rights, which normally expire after three years. However, it kept exclusive rights to music from some acts, including Jay Chou, one of the Chinese-speaking world’s most influential artists. Following this latest ruling, Tencent may still be able to retain rights to music from some domestic indie acts.
It is unknown whether Tencent Holdings Ltd will face a further antitrust penalty, other than the ruling on Tencent Music. Meanwhile, big tech companies in China continue to face regulatory actions from Chinese authorities.