Competition Currents | September 2021 | Greater China | Japan
On July 24, 2021, the State Administration for Market Regulation (SAMR), China’s antitrust regulator, issued a penalty against the internet giant Tencent for “gun jumping,”—i.e., implementing a concentration with China Music Corporation (CMC) about four years ago without notifying the regulator as required under China’s Anti-Monopoly Law (AML). Tencent was fined with RMB500,000, the maximum penalty allowed with respect to the said violation under the current AML, and certain restrictive conditions were imposed on Tencent in order to, as proclaimed by SAMR in their decision, “restore the competition order in the relevant market.”
On July 12, 2016, Tencent acquired 61.64% equity interest of CMC and injected Tencent’s own online music streaming business, namely QQ music, into CMC. Tencent became the sole controller of CMC’s businesses after the transaction. Tencent closed the deal in 2017 without reporting it to China’s antitrust regulator. The combined business was later renamed as Tencent Music Entertainment Group and was listed in the United States in 2018.
In the decision, SAMR confirmed that the turnovers of both Tencent and CMC in 2015 crossed the notification thresholds under the AML; thus, the said transaction should have been reported to SAMR. SAMR further clarified that both Tencent and TMC have overlapping businesses in the relevant market of “online music playing platforms” in China, which market shall incorporate all platforms offering music broadcasting services offered to consumers via online streaming or downloading platforms. Tencent and its affiliates were ordered to “restore the competition order in the relevant market” with the following specific obligations imposed upon Tencent: (1) Tencent must relinquish exclusive copyright licenses with upstream copyright holders within 30 days after the date of the decision, and refrain from entering into new exclusive licenses; (2) Tencent must refrain from requiring upstream copyright holders to grant Tencent terms and conditions (including scope of license, license fees, and term of license) more favorable than those granted to other competitors without justifiable reasons; and (3) Tencent must refrain from making high advances of copyright fees to upstream copyright holders.
A. The JFTC launches an investigation into the interchange fees of credit card companies.
On July 21, 2021, the Japan Fair Trade Commission (JFTC) revealed its plan to commence an investigation into the actual condition of an interchange fee—i.e., the fee charged to merchants for processing credit card payments. In the report published by the JFTC in 2019, the JFTC pointed out that it would be desirable to disclose the level of an interchange fee, but international-branded credit card companies have not disclosed their interchange fees to the public. Because of that, it has been observed that fair competition among card companies may be hindered, resulting in a heavier burden on restaurants and other merchants.
The JFTC plans to issue questionnaires and conduct interviews with consumers and credit card companies during FY 2021. If the JFTC finds any matters in light of the antimonopoly acts or competition policy, the JFTC will present its position and/or its opinion on them.
B. Follow-up; Final report on digital advertising.
As mentioned in the March newsletter, the JFTC revealed its final report on digital advertising on Feb. 17, 2021. Afterwards, a meeting was held to exchange opinions on the guidelines, and the minutes were published July 21, 2021.
These minutes provide direction regarding enforcement, i.e., whether to impose a surcharge in case of a violation or to resolve the issue through an agreement between the JFTC and the business entity (“commitment procedure”). According to the JFTC, the purpose of administrative sanctions is to restore competitive order. For that purpose, if a cease and desist order is appropriate, it will be used, and if a commitment procedure is more effective, such method may be applied. JFTC believes that rather than focusing on some measure in advance, it will make a choice in terms of what method will most effectively eliminate the problematic behavior.
Co-authored by Edoardo Gambaro, Pamela J. Marple, Yuji Ogiwara, Stephen M. Pepper, Gillian Sproul, Hans Urlus , Dawn (Dan) Zhang, Mari Arakawa, Filip Drgas , Marta Kownacka, Pietro Missanelli, Massimiliano Pizzonia, Anna Rajchert, Jose Abel Rivera-Pedroza, Ippei Suzuki, Rebecca Tracy Rotem, Chazz Sutherland, John Gao.