Tencent goes on the front foot with China antitrust meeting

Pony Ma showing respect to antitrust officials is an indication that the Tencent boss is trying to stay ahead of complying with strict antitrust rules, say experts

Tencent goes on the front foot with China antitrust meeting
Tencent boss meets China antitrust officials as scrutiny widens. Photo: Reuters

(ATF) Pony Ma, the reticent founder of Tencent Holdings, China's biggest social media and video games company, met with China's antitrust watchdog officials this month to discuss compliance at his group, said reports.

The meeting is seen to be the most concrete indication yet that China's unprecedented antitrust crackdown, which started late last year with billionaire Jack Ma's Alibaba business empire, could soon target other internet behemoths.

Beijing has vowed to strengthen oversight of its big tech firms, and Tencent is expected to be the next in line for sharper antitrust regulatory inquiries. Experts say that by meeting officials, Tencent is trying to get ahead of that uncertainty clouding the prospects for Tencent Holdings and its $120 billion financial services operation which ranks among the world's largest and most valuable.

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The authoritarian regime considers tech giants like Tencent, whose WeChat messaging and payment mobile app is ubiquitous in the world's second-largest economy, too large and too influential and therefore, a danger to the communist regime.

Citing concerns that they have built market power that stifles competition, misused consumer data and violated consumer rights, China has already tightened laws around the internet, and has humbled billionaire Jack Ma and cut his Alibaba e-commerce empire down to size with antitrust regulations.

Outside observers say, unlike Jack Ma, Pony Ma is sending every possible signal that he has no intention of challenging the Communist leadership or becoming a larger-than-life figure whose personal following could rival that of dictator Xi Jinping.

Ma is currently the second-richest man in China, with a net worth of about $74 billion, but rarely makes any effort to capture the public eye.

FLAMBOYANT ENTREPRENEUR

Jack Ma (no relation to Pony), on the other hand, has been a flamboyant entrepreneur who was China’s richest man before he publicly criticised the CCP’s hidebound regulators in October.

Jack Ma vanished for a while, and when he resurfaced he was China’s fourth–richest man, having lost about $12 billion in net worth – and the opportunity to hold the biggest IPO in world history for his financial corporation, the Ant Group.

Speaking to reporters following the earnings announcement, Ma said the company was "working actively" with regulators on compliance, including combing through some of its previous investments. He did not refer to the meeting.

Tencent President Martin Lau said the company's interaction with the antitrust watchdog was part of the normal course of business.

'REGULAR MEETING'

"We, Tencent, conduct meetings with regulators on a regular basis and this is one of the regular meetings that we have," Lau said.

"During the meeting, we had a discussion about a broad range of topics, and the main focus was actually on creating a healthy environment for innovation."

Martin Lau also told investors on Wednesday that its platform is open to industry players and that collaboration with any big companies needs to be "mutually constructive," responding to media reports that Tencent will allow rival Alibaba Group Holding's Taobao marketplace to sell through its mini-program.

"I would say our general principle is that we are open in nature, we have an open platform which encourages organic cooperation with other platforms," Lau said in an earnings call.

While stressing Tencent's openness, Lau emphasised its responsibility to protect user privacy and the need to prevent spamming of its users in any collaboration.

STRICTER REGULATIONS

Lau also played down the effect of a media report that Chinese authorities urged the company to move its financial services business to a separate holding company that would be subjected to stricter regulations.

Tencent, along with other Chinese tech groups, was recently fined by the authorities for failing to report past investments in smaller companies.

But to cushion the impact of any potential moves against it, Tencent has been scrambling to take corrective action as well.

For instance, Tencent has announced plans to merge the country's top two video game live-streaming sites in order to resolve antitrust concerns.

In a separate deal, the firm, which held a 5% stake in local gaming firm Zhejiang Century Huatong Group, had also planned to buy another 10%, said one of the people and another person with direct knowledge, making it the largest shareholder.

ANTITRUST PROCESS

Earlier this month, however, Tencent acquired 5% of Century Huatong and became the second-largest shareholder instead, looking to avoid a potentially lengthy and complicated antitrust approval process.

Meanwhile, John Lo, Tencent's chief financial officer told investors that China's anti-monopoly clampdown will have limited effect on investments going forward, as the company tends to take minority stakes in companies.

"A different antitrust regime will not impact the desirability of us investing in and supporting start-ups and helping them to grow into bigger, better companies over time," he said.

  • With reporting by Reuters.

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