China To Order Tencent To Yield Music Label Exclusivity

China's antitrust regulator is set to order the music streaming arm of Tencent Holdings Ltd. to give up exclusive rights to music labels which it has used to compete with smaller rivals, two people with knowledge of the matter said.

The State Administration of Market Regulation (SAMR) will also fine it 500,000 yuan ($77,150) for lapses in reporting the acquisitions of apps Kuwo and Kugou, the people told Pei Li of Reuters - a milder penalty than the forced sale indicated earlier this year.

SAMR, Tencent Holdings and Tencent Music Entertainment Group did not respond to Reuters' requests for comment.

The move is the latest in a clampdown to curb the economic and social power of China's once-loosely regulated internet giants. The campaign, which began late last year, has included a record 18 billion yuan fine on e-commerce firm Alibaba Group Holding Ltd for abusing its market position.

In April, Reuters reported that SAMR aimed to fine Tencent Holdings at least 10 billion yuan, and that the social media leader was lobbying for leniency. Reuters also reported that SAMR had told Tencent Music it may have to sell Kuwo and Kugou.

Instead, SAMR will no longer require a sale but will impose the maximum 500,000 yuan fine for not properly flagging the 2016 app purchases for antitrust review, the people said on Monday.

"Personally, I think this punishment falls short and is even a boon for Tencent. The acquisitions obviously would restrict competition in the market, and should have been vetoed," said You Yunting, a lawyer with Shanghai-based DeBund Law Offices.

"It is too little a hit to Tencent Music's dominant position in the market," said You, a commentator on antitrust law.

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