Too much of a good thing? Tencent and its 80% market share in exclusive music copyright
Trying to increase your market share in China please? If that’s what you have in mind, then be mindful of the recent news where the Chinese tech giant Tencent in compliance with orders from the State Administration for Market Regulation, waived its exclusive right to music copyrights.
On 12 July 2016, Tencent invested in China Music Corporation (“CMC”), acquiring 61.64% of total shares in CMC and thus gaining the sole control of CMC (“the Merger Deal”). In December 2016, the merged entity was renamed Tencent Music Entertainment Group. On 6 December 2017, the Merger Deal was completed. In January 2021, based on a tip-off, the State Administration for Market Regulation (“SAMR”) initiated an investigation into the Merger Deal, suspecting Tencent of engaging in unlawful acts of concentration of business operators.
The investigation revealed that, in 2016, Tencent and CMC had a share of around 30% and 40% respectively of the market in the market for music streaming service in China. Tencent achieved a high market share by merging with its major competitors, the result of these was that it obtained 80% ownership of all the exclusive music copyright in China. This was likely to induce copyright holders to enter into more exclusive music copyright agreements with Tencent, or may allow Tencent to demand better trading terms than its competitors, or may even enable Tencent to raise market entry barriers by paying copyright holders high upfront fees (or other copyright payment models), which have or may have the effect of excluding or restricting competition in the relevant market.
On 24 July 2021, the SAMR imposed administrative penalties in accordance with the Anti-Monopoly Law and the Interim Provisions on the Examination of Concentration of Operators: 1) Tencent and its affiliated companies were ordered to waive the exclusive music copyrights within 30 days. 2) Tencent was ordered to take actions to restore the state of competition in the market, including halting the high upfront fees or other similar copyright fee models, and in the absence of reasonable grounds, Tencent is not allowed to demand better trading terms than its competitors from the upstream copyright holders. 3) Tencent is ordered to report annually to the SAMR on the fulfillment of its obligations for three years, and SAMR will strictly monitor Tencent’s implementation in accordance with the law.
Tencent issued a “Statement on Waiver of Exclusive Music Copyrights” on 31 August, stating that in accordance with the requirements stated in the penalty decision, as of 23 August, it had formally sent the "Notice of Waiver of Music Copyright Cooperation Agreement" and the "Reminder of Waiver of Music Copyright Cooperation Agreement" by letters to the relevant upstream copyright holders, seeking intently to cancel the exclusive agreement with the relevant upstream copyright holders as soon as possible.