The government action is part of a broader attempt by Beijing to regulate its domestic technology sector, which grew rapidly after years of relatively little regulation. Since last December, regulators have fined 11 companies, including Tencent, Baidu, Alibaba and ByteDance, for failing to disclose past acquisitions and investments.

News of the regulatory fines sent shares of Tencent Music Entertainment on the New York Stock Exchange down more than 10% on Wednesday and Thursday to $12.69 a share. Shares of other Chinese tech companies listed in the U.S., including JD.com, Alibaba and Pinduoduo, also slid. (TME rebounded slightly on Friday, up 1.5% to $12.88.)

Still, despite the sweeping penalties enacted, the lack of forced divestitures seemed to allay investor concerns that Tencent Music would have to sell off the Kuguo and Kuwo music services it acquired in 2016, which helped the music company achieve a dominant position in the Chinese streaming market. Regulators have expressed concern over how the company’s streaming concentration and the exclusive deals it signed with the major music labels have allowed TME to grow rapidly at the expense of its rivals.

Among China’s top five streaming apps, TME’s three main platforms — QQ, Kuguo and Kuwo — controlled 77% of China’s monthly active users as of December, according to QuestMobile, a Chinese research company. Since TME went public on the New York Stock Exchange in 2018, its market cap has grown from $21 billion to $26 billion.

“It doesn’t seem at this point that there will be a divestiture of TME’s music apps,” Andy Mok, a senior research fellow at the Center for China and Globalization, a Beijing think tank, tells Billboard. “It seems to be more of a question of notification. The government is looking for a demonstration of greater sensitivity by tech companies.”

Still, the crackdown could spell more trouble for Tencent Holdings, which has been fined at least five times since last December for failing to report acquisitions to antitrust regulators for review. The company has acquired many smaller entities whose acquisitions have not yet been subject to penalties.

The regulator said the cases did not constitute monopolies by limiting market competition, but that the companies had failed to file for proper approval. Many of the deals are made through subsidiaries of the parent companies.

The antitrust fines came less than a week after China’s internet watchdog launched a data security investigation into the ride-hailing giant Didi and several other Chinese internet companies listed overseas.

Last week (July 2), the Cyberspace Administration of China banned Didi from signing up new users while it conducts a cybersecurity review of the company, days after it conducted the second-biggest U.S. initial public offering for a Chinese company. The regulator said Didi had illegally collected users’ personal information. Shares of Didi on the New York Stock Exchange fell nearly 20% to $12.49 a share on the news. (In Wednesday’s action, Didi also received eight penalty tickets for merger irregularities.)

Shortly after announcing its Didi probe, the regulator also opened cybersecurity reviews into U.S.-listed Boss Zhipin, an online recruitment platform backed by Tencent Holdings. The regulator also named Yunmanman and Huochebang, subsidiaries of the New York-listed Full Truck Alliance.

The Cyberspace Administration of China said the probe had been opened to “prevent national data security risks.”

Regulatory actions are extending beyond the tech sector. On Tuesday, China’s cabinet said it would step up supervision of Chinese companies listed offshore in order to crack down on illegal activity in the securities market and punish fraudulent securities issuance.

China’s securities regulator is setting up a team to review plans by Chinese companies for initial public offerings abroad, according to a Reuters report.

Tencent Music also faces potential scrutiny over the data it collects on its 615 million monthly average users (61 million of which are subscribers), Mok says. “It is psychographic data that, aside from indicating music preferences, can be mapped to other aspects of a user’s personality and psychological variables,” Mok explains. “TME’s recommendation engines are almost like TikTok — you can infer a lot based on the content the user is interested in.”

And, while it was spared this time, Tencent Music’s market concentration continues to put it at risk of being cut down to size, Mok says. “A divestiture is not inconceivable, and the government might call for that later after they discover more information or decide that [the company] is indeed hurting competition.”

Additional reporting by Kyle Mullin in Beijing



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