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Summary
- China’s State Administration of Market Regulation has imposed fines on Alibaba, Tencent-backed China Literature and Shenzhen Hive Box for not providing proper details of M&A deal for anti-trust reviews.
- Both these companies had entered into M&A deals recently that could potentially increase their dominance in the market they operate in.
Exercising its new law on anti-competitive business behaviour in the country, China has imposed a fine of CN¥ 500,000 each on China Literature and Shenzhen Hive Box for not providing proper details on recent M&A deals for anti-trust reviews.
The State Administration of Market Regulation’s (SAMR) fine on Alibaba (NYSE:BABA) and Tencent Holdings (OTC:TCEHY) backed firms is the heaviest ever penalty under 2008 anti-monopoly law.
Also, it is the first time that an internet company has been fined for violating the anti-monopoly law. The regulator while bracing for stricter scrutiny said that it is not going to tolerate monopolistic practices in future.
The country, which has seen an explosive increase of private business enterprises in the last two decades, has made significant changes to the business laws to incorporate international best practices. Anti-monopoly law and other such laws are important milestones in the economic reforms process of China which have been taking place since it joined the World Trade Organization.
Anti-trust legislation
In order to make the new anti-trust legislation at par with the best practices followed across the world, the drafting team consulted experts from various countries. They thoroughly studied EU and US antitrust laws and picked up the core basics from both and drafted the domestic legislation.
Since the legislation was implemented in August 2008, three major cases have been tried under this law, 1. Ruibang vs. Johnson & Johnson, 2. Huawei vs. IDC case, 3. Tencent vs. Qihu 360 case.
Course of action
After imposing the fine, the regulator has also said that it will review and investigate other deals based on confidential information received by it. SAMR in a statement said: “The Internet industry is not outside the purview of anti-monopoly law."
It has also announced inquiries into other deals involving Alibaba Group and Tencent Holdings. Last week, a politburo meeting which was chaired by President Xi Jinping reiterated its stand that Beijing would step up its antitrust efforts.
