China’s market regulator has fined Tencent, Alibaba and other tech giants for failing to properly report 22 past merger deals, sending tech shares tumbling Thursday.
The country’s State Administration for Market Regulation (SAMR) issued a fine of RMB500,000 ($77,000) for each late Wednesday — chump change for Big Tech behemoths but the max allowed by the local anti-trust laws for merger deal violations.
The move comes amidst an unprecedented rise in government scrutiny on monopolistic practices in the tech sector whose consequences are reverberating through the entertainment industry.
Alibaba was hit with accusations of irregularities for six deals, including one for its 2014 purchase of the Guangzhou F.C. soccer club. Tencent was hit with five, including deals to acquire controlling stakes in leading mobile game app creator Cheetah Mobile and fashion e-commerce social platform Mogu. Ride-hailing app Didi was hit with eight.
The fines levied Wednesday nevertheless pale in comparison to the record $2.8 billion anti-trust fine slapped on Alibaba in April for charges of monopolistic behavior. Tencent may also be facing down an anti-trust fine of at least RMB10 billion ($1.5 billion), according to Reuters — a move that is expected to particularly impact its music streaming business.
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Even so, investors were still alarmed. The Hang Seng Tech Index tracking the 30 biggest Hong Kong-listed tech firms fell Thursday 3.7% to its lowest point since October, while Alibaba and Tencent stocks fell 4.1% and 3.7%, respectively.
More bad news may be forthcoming for the tech and payments sector. China’s central bank on Thursday said that it will up its scrutiny and regulation of “irregularities” in the payments market, following its April order to overhaul Alipay app owner Ant Group.