The State Administration for Market Regulation ordered Tencent Holdings Co., Ltd. to lift the exclusive copyright of online music and other penalties according to law

In January 2021, the State Administration for Market Regulation initiated an investigation into the suspected illegal implementation of concentration of business operators by Tencent Holdings Co., Ltd. (hereinafter referred to as Tencent) in its acquisition of shares in China Music Group in July 2016.

In accordance with the Antimonopoly Act, the State Administration for Market Regulation has investigated the facts of the illegal implementation of concentration in this transaction, and fully evaluated the shares, control, concentration, and impact of concentration on market entry and consumers of the business operators participating in the concentration. At the same time, it has widely solicited the opinions of relevant government departments, industry associations, experts and scholars, and competitors in the same industry, and has listened to Tencent’s statements on many occasions.

The investigation shows that the relevant market in this case is the online music playback platform market in China. Genuine music copyright is the core asset and key resource for the operation of online music playback platforms. In 2016, Tencent and China Music Group had a market share of about 30% and 40% respectively. Tencent gained a higher market share by merging with its main competitors in the market. After the concentration, the entity occupied more than 80% of the exclusive music library resources. It may be able to prompt upstream copyright parties to reach more exclusive copyright agreements with them, or require them to be given better trading conditions than competitors. It may also be able to raise market entry barriers through copyright payment models such as high upfront payments, which has or may have the effect of excluding or restricting competition in the relevant market.

According to Article 48 of the Antimonopoly Act and Article 57 of the Interim Provisions on the Examination of Concentration of Business Enterprises, in accordance with the principle of paying equal attention to development and standardization, the State Administration for Market Regulation has made an administrative penalty decision in accordance with the law, ordering Tencent and its affiliated companies to take measures to restore market competition within 30 days, such as lifting the exclusive music copyright, stopping the payment of copyright fees such as high advance payments, and not requiring the upstream copyright party to give it better conditions than competitors without justifiable reasons. Tencent reports to the State Administration for Market Regulation on the performance of its obligations every year within three years, and the State Administration for Market Regulation will strictly supervise its implementation in accordance with the law.

This case is the first case in our country since the implementation of the Antimonopoly Act to take necessary measures to restore the state of market competition. Ordering Tencent to lift the exclusive copyright and other measures will reshape the relevant market competition order, reduce market entry barriers, so that competitors have a fair access to upstream copyright resources. It is conducive to returning the focus of competition from using capital advantages to grabbing copyright resources to the rational track of innovating service levels and improving user experience. It is conducive to promoting a reasonable way to calculate copyright fees in line with international standards and reducing downstream operating costs. It is conducive to cultivating new market entrants, creating a fairer competitive environment for existing enterprises, protecting consumers’ right to choose, and ultimately benefiting consumers. Promote the healthy development of standardized innovation in the online music industry.