Following thorough investigation, which has been on since this January, the State Administration for Market Regulation of China (the SAMR) has recently imposed penalty on Tencent’s acquisition of China Music.
Relevant market was determined by the regulator as a market of online music broadcasting platforms in China, where music copyrights were considered as a major asset and a key resource. In 2016, when the acquisition took place, Tencent and China Music possessed 30% and 40% of the market respectively. By acquiring its main rival, Tencent increased its market share and gained control over 80% of exclusive music content. The acquisition might have driven upstream copyright holders to conclude more deals with Tencent or to offer more favorable conditions, or have risen market entry barriers by imposing such copyright payment models as high advance payments. To some extent, such effects were likely to eliminate or restrict competition.
Following the principle of equal importance of development and regulation, the SAMR gave Tencent and its affiliates entities 30 days to take measures to restore market competition, including: not to conclude exclusive music license agreements and to terminate those already concluded (except for independent musicians and exclusive cooperation for the first release of new tracks), to stop high prepayments and not to make unreasonable requests concerning better deal conditions from upstream copyright holders. Tencent must report to the SAMR on its compliance for three following years, and in the meantime the SAMR will conduct relevant supervision. The regulator also imposed a fine of RMB 500 000 (≈USD 77 thousand).
It is the first time the competition authority imposes compulsory measures to restore competition on unapproved concentration deal since the implementation of the China’s Antimonopoly Law in 2008. The ruling to end all exclusive music license deals will lower market entry barriers, provide other competitors with fair and equal access to upstream copyright resources, shift the focus from using capital advantages to seize copyrights to improving innovations and user experience, establish reasonable way to calculate copyright fees and therefore reduce operation costs.
Tencent replied it would respect such decision, fulfil all the requirements carefully, operate in compliance with relevant law and regulation, duly perform its social responsibilities and ensure appropriate rectification.