The State Administration for Market Regulation, Ordering Tencent Holdings Co., Ltd. to lift the exclusive copyright of online music and other penalties in accordance with the law .
In January 2021, the State Administration of Market Supervision filed an investigation into Tencent Holdings Co., Ltd.'s (hereinafter referred to as Tencent) acquisition of shares of China Music Group in July 2016 for allegedly illegally implementing operator concentration.
The General Administration of Market Supervision, in accordance with the Anti-Monopoly Law, ascertains the fact that this transaction is illegally implementing concentration, and fully evaluates the relevant market share, control, concentration, and the impact of concentration on market entry and consumers of the operators participating in the concentration. At the same time, it has extensively solicited opinions from relevant government departments, industry associations, experts and scholars, and competitors in the industry, and has listened to Tencent's opinions on many occasions.
The investigation shows that the relevant market in this case is the online music broadcasting platform market in China. The copyright of genuine music is the core asset and key resource for the operation of the online music broadcasting platform. In 2016, Tencent and China Music Group accounted for about 30% and 40% of the relevant market respectively. Tencent obtained a higher market share by merging with major competitors in the market. After the concentration, the entity owns more than 80% of the exclusive music library resources. Has the ability to urge upstream copyright parties to reach more exclusive copyright agreements with them, or require them to be given better trading conditions than their competitors, and may also have the ability to increase market entry barriers through copyright payment models such as high advance payments, and have or It may have the effect of eliminating or restricting competition.
In accordance with Article 48 of the Anti-Monopoly Law and Article 57 of the “Interim Provisions on the Review of Concentration of Undertakings”, the State Administration for Market Regulation has made an administrative penalty decision in accordance with the law, ordering Tencent and its affiliates to adopt 30 Measures to restore the state of market competition, such as the removal of exclusive music rights within days, the suspension of payment methods for copyright fees such as high prepayments, and the prohibition of asking upstream copyright parties to give them conditions superior to their competitors without justifiable reasons . Tencent will report to the State Administration of Market Supervision on the performance of its obligations every year for three years, and the State Administration of Market Supervision will strictly supervise its implementation according to law.
This case is the first case in which necessary measures have been taken to restore market competition since the implementation of China’s anti-monopoly law . Ordering Tencent to lift its exclusive copyright and other measures will reshape the relevant market competition order, lower market entry barriers, and provide competitors with fair access to upstream copyright resources, which is conducive to returning the focus of competition from using capital advantages to grab copyright resources to innovation Service levels and improve user experience are on the rational track; 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 and creating a fairer competitive environment for existing companies to ensure Consumers’ right to choose will ultimately benefit consumers and promote the healthy development of the online music industry’s normative innovation.
More news >>
Anti-monopoly regulation falls a heavy hammer
The long-maligned exclusive copyright of online music ceases
Meng Yanbei
On July 24, 2021, the State Administration of Market Supervision and Administration issued an administrative penalty decision against Tencent Holdings Co., Ltd. (hereinafter referred to as Tencent)’s acquisition of equity in China Music Group for illegally implementing operator concentration, and ordered Tencent and its affiliates to lift exclusive copyrights and stop high Payment methods for copyright fees such as prepayments, etc., will restore the state of market competition. The case directly hits the "competitive pain points" of the online music broadcasting platform market in China, focusing on breaking exclusive copyrights and stopping high-prepayment copyright fees, ending the most-favored-nation treatment clause, reshaping the relevant market competition pattern, and continuing to play a role in my country's online music industry. Healthy development will have far-reaching impact. It not only demonstrates the attitude and determination of China's anti-monopoly law enforcement agencies to resolutely maintain fair competition in the platform economy, but also has a very important symbolic significance for the development of China's anti-monopoly law enforcement.
1. Release of regulatory dividends, and take necessary measures to restore competition to the concentration of business operators after illegal implementation for the first time
This case is the first case in which necessary measures have been taken to restore the market competition order after the implementation of the Anti-Monopoly Law. The anti-monopoly review of the concentration of business operators is an important institutional arrangement to avoid competition damage and prevent market monopoly from the source. Operators are obliged to report to the anti-monopoly law enforcement agency in a timely manner for the concentration that meets the reporting standards. If they fail to declare the illegal implementation of the concentration in accordance with the law, they shall bear corresponding legal liabilities. Article 48 of my country’s “Anti-Monopoly Law” clearly stipulates that “Where operators implement concentration in violation of the provisions of this law, the Anti-Monopoly Law Enforcement Agency of the State Council shall order them to stop the concentration, dispose of shares or assets within a time limit, transfer business within a time limit, and take other necessary measures. To restore to the state before the concentration, a fine of less than 500,000 yuan can be imposed."
Since the end of 2020, the State Administration of Market Supervision has imposed penalties on a number of platform companies’ illegal implementation of operator concentration, warning companies engaged in operator concentration to strengthen anti-monopoly compliance management, declare operator concentration in accordance with the law, and maintain a good market competition pattern. . It can be seen from the “Administrative Punishment Decision” in this case that after the concentration occurred, the market share of relevant entities increased after the concentration, copyright resources were further integrated, major competitors in the relevant market decreased, market concentration increased, and market entry barriers for online music broadcasting platforms Improved, consumer welfare may be harmed. The General Administration of Market Supervision fully assessed the impact of the transaction on market competition from the relevant market share, control, concentration, and the impact of the concentration on market entry and consumers of the operators participating in the concentration, and determined that this case has an impact on online music broadcasting in China The platform market has or may have the effect of eliminating or restricting competition.
In order to restore fair competition in the market order, the State Administration for Market Regulation has accurately applied the provisions of Article 48 of the Anti-Monopoly Law and ordered Tencent and its affiliates to not reach or in disguise reached exclusive copyright agreements or other exclusive agreements with upstream copyright parties. Require or disguisely require the upstream copyright party to give the parties better conditions than other competitors, not to increase the cost of competitors in disguised form by means of high advance payments, eliminate or restrict competition, and propose to Tencent to declare the concentration of operators in accordance with the law and operate in compliance with laws and regulations. Clear requirements. This is the biggest highlight of this case and the greatest significance of the punishment decision in this case. It fully embodies the market thinking and the spirit of the rule of law, and demonstrates the professionalism of anti-monopoly law enforcement agencies and their deep grasp of the laws of platform economic development.
2. Adhere to both development and standardization, and build a new competitive advantage for the country
The ninth meeting of the Central Finance and Economics Committee emphasized that it is necessary to proceed from the strategic height of building a new competitive advantage of the country, adhere to both development and regulation, better coordinate development and security, domestic and international, promote fair competition, oppose monopoly, and prevent disorderly expansion of capital . The platform economy is a new driving force for my country's economic development. The ultimate goal of supervision and law enforcement is to further stimulate the innovation power and development vitality of platform enterprises, realize the sustained and healthy high-quality development of platform economic norms and innovation, and build a new competitive advantage for the country.
The handling of this case is the implementation and vivid embodiment of the above-mentioned principles. On the whole, the online music broadcasting platform market is still an emerging industry, and its development is in the ascendant; related companies not only need to develop and grow in the domestic market, but also need to "go out" to compete in the international market. In the choice of attaching restrictive conditions to cases of concentration of undertakings, how to solve the effects of eliminating and restricting competition brought about by mergers and acquisitions, but also to fully stimulate the innovation power of enterprises and achieve stability and long-term development, the grasp of regulatory standards is very important and a test The wisdom of anti-monopoly law enforcement agencies. In this case, the State Administration for Market Regulation did not choose structural relief measures such as "disposal of shares or assets within a time limit, and transfer of business within a time limit" when handling this case. Instead, it adopted precise behavioral relief measures, ranging from breaking exclusive copyrights and regulating copyright payment methods. Starting from a perspective, while protecting fair competition in the market and bringing strong vitality to the development of the industry, it is also conducive to maintaining the core competitiveness of the enterprise and laying a solid foundation for platform enterprises to strive for more development opportunities and a broader development stage.
3. Accurately solve the pain points of competition and reconstruct the market competition ecology of online music playback platforms
In the field of platform economy, due to its unique characteristics of cross-industry competition, dynamic competition, "winner takes all", and high agglomeration, the competitive impact of relevant behaviors is more complicated, which is a common challenge faced by global antitrust law enforcement agencies.
As the platform is a bilateral or multilateral market, the investment of resources on one side of the platform is often of great significance to the development of the platform. In the market competition of online music broadcasting platforms, copyright of genuine music is the core asset and key resource input for platform operation. A music platform that has obtained an exclusive license can decide whether to sublicense to a competitor's platform, as well as the price and scope of the sublicense, resulting in a certain degree of exclusivity for music copyright resources. Through exclusive copyright agency, Tencent has increased the transaction link for online music platforms to obtain copyrighted content, increased the cost of acquiring genuine music content on new platforms, and formed a certain degree of "raw material blockade" for other competitive platforms to obtain necessary copyrighted music content. , Has raised the market entry barriers. Therefore, when my country’s anti-monopoly law enforcement agency chose punishment and relief measures in the case of Tencent’s acquisition of equity in China Music Group’s illegal implementation of operator concentration, it took a series of necessary measures such as requiring Tencent not to reach an exclusive copyright agreement with upstream copyright parties or in disguise. Competitors in relevant markets have fair access to upstream copyright resources, and the focus of competition has been returned from irrationally grabbing copyright resources by capital advantage to innovative service levels, improving user experience on a rational track, and promoting relevant platform companies. Level competition to achieve high-quality development is of great significance. At the same time, this case retains the exclusive form for independent musicians and new song debuts, which is conducive to protecting the platform's investment enthusiasm, fostering and enriching local music, and promoting the high-quality development of my country's related cultural industries.
At the same time, my country’s online music copyright fee billing model is unreasonable and the prepayment is too high for a long time and has been criticized by the industry. At present, the method of high advance payment + income sharing is used to disguisely raise relevant market entry barriers, which is not conducive to industrial innovation and development. By attaching restrictive conditions to this case, requiring Tencent to negotiate and ask prices based on the actual usage of copyrights, it is conducive to gradually achieving the goal of “settlement of copyright fees based on actual usage” in line with international standards, and further reducing domestic platforms while maintaining fair competition in the market. Enterprises pay the burden of copyright costs to overseas copyright owners.
As analyzed above, the biggest highlight of this case is to order Tencent and its affiliates to take necessary measures to restore the state of competition in the relevant market. According to the current Anti-Monopoly Law, the fine of 500,000 yuan in this case is the upper limit of the fine for related violations. It is reported that the newly revised draft of the "Anti-Monopoly Law" has greatly increased the penalties for illegal undertakings of concentration, and will further increase the penalties for such violations after it is announced and implemented.
4. Pay attention to the market competition in the platform economy and continue to strengthen anti-monopoly supervision and law enforcement in the platform economy
The platform economy has become the world's most important business model and new economic form, and has triggered the "digital butterfly change" in various fields of economy and society. The super platform has grown rapidly, has a huge scale, and has a wide range of business, which is changing people's social life and economy. Life, with strong social mobilization ability and social order shaping ability, while bringing efficiency improvement and consumer welfare to society, it may also bring a series of clear or potential risks such as damage to personal privacy. Among them, competition The issue of risk regulation has aroused global attention. For example, on July 9, 2021, the United States issued an executive order aimed at establishing a "full government" mechanism to strengthen economic competition and prevent anti-competitive behavior in the technology industry and other industries. What’s notable is that the executive order specifically emphasizes the use of anti-monopoly laws to deal with the challenges posed by new industries and new technologies, including the rise of dominant Internet platforms, especially as they stem from continuous mergers and new technologies. Competitor acquisition, data aggregation, unfair competition, user monitoring, and the existence of network effects.
The platform has the characteristics of data as the production factor, digital technology as the support, multilaterality, openness, unique resource allocation, network effect, lock-in effect, and leverage effect. China’s anti-monopoly law enforcement agencies should be based on China’s relevant market competition and platform’s characteristics. Market power, behaviors engaged in and the impact of behaviors on competition and consumer welfare, etc., actively carry out continuous market research and market competition status research on the market where the platform is located, and pay close attention to the behaviors that the platform engages in that may generate competition risks, especially for Stifling mergers and acquisitions of start-ups, etc.
At the same time, my country’s anti-monopoly law enforcement agencies should also track and evaluate the follow-up effects of typical anti-monopoly cases in the field of platform economy to determine the impact of anti-monopoly penalties on the market, and evaluate the relief and penalties taken by the anti-monopoly law enforcement agencies for violations The subsequent impact of the measures on market competition and the impact on the development of the industry, in order to further enhance the scientificity and accuracy of anti-monopoly supervision and enforcement, promote the continuous improvement of anti-monopoly legislation, enforcement and competition compliance in the field of platform economy in my country, and prevent capital loss Orderly expand, and promote the healthy and sustainable development of the platform economy. ( The author is a professor at Renmin University of China Law School and a member of the Expert Advisory Group of the Anti-Monopoly Committee of the State Council )
