China tech firms look to bolster legal defence amid regulatory crackdown: sources

FILE PHOTO: The logo of Alibaba Group is seen at its office in Beijing
FILE PHOTO: The logo of Alibaba Group is seen at its office in Beijing, China January 5, 2021. REUTERS/Thomas Peter

February 9, 2021

By Kane Wu and Julie Zhu

HONG KONG (Reuters) – China’s big technology firms are stepping up hiring of legal and compliance experts and setting aside funds for potential fines, according to sources and job postings, amid an unprecedented anti-trust and data privacy crackdown by regulators.

Beijing is tightening scrutiny of its tech firms, and in December eyebrows were raised when regulators launched an anti-trust probe into e-commerce giant Alibaba after the halting of the $37 billion IPO of payment affiliate Ant Group.

The regulatory scrutiny, which ended the once laissez-faire approach, comes after a string of high-profile deals in the sector triggered concerns about competition and consumer data.

The State Administration for Market Regulation (SAMR) has imposed fines on some completed deals for failure to apply for anti-trust clearance. Authorities are also seeking stricter customer data collection and protection rules.

Companies including Alibaba, Tencent, Meituan, Baidu and ByteDance are hunting for dozens of legal and compliance professionals, according to the people and a Reuters review of their job postings.

Some of the job postings are specifically for regulation compliance and data related areas.

Alibaba is currently looking to hire 69 legal and compliance professionals, of which about half a dozen are for competition, regulation compliance and data privacy, its website showed.

Tencent and Meituan have also been in the market in the last two to three months to hire about a dozen each for legal and compliance roles in their respective companies, job postings on company websites showed.

Describing a public policy specialist job posted last month, Meituan said the role would be “responsible for studying the new development and regulation trend of the internet space and assist in strategy making”.

An Alibaba spokeswoman said the company routinely recruits to support business developments, and dismissed any suggestions that the hires were in response to the recent regulatory developments.

Tencent and ByteDance declined to comment, while Meituan and Baidu did not respond to a request for comment.

The sources declined to be named due to the sensitivity of the matter.

WIDENING PROBE

In a sign that regulators are now bolstering their punitive muscle to rein in tech companies, online discount retailer Vipshop Holdings was hit with a 3 million yuan ($464,000) fine this week.

The fine came a day after SAMR released new anti-monopoly guidelines targeting internet platforms.

One of the people said each tech company is setting aside a budget of 500,000 yuan ($77,401) per deal in a worst-case scenario of falling foul of regulations – the maximum penalty amount for anti-trust breaches under China’s 2008 anti-monopoly law.

But potential fines could be much bigger – Beijing is set to revise the 12-year-old anti-monopoly law seeking to increase the maximum fine by 100 times or 10% of a company’s annual sales in certain cases, as per draft proposals issued last month.

Two senior Beijing-based anti-trust lawyers said several tech firms are setting aside funds or increasing budget to review and address possible violations of competition rules.

The recent fines on some of the old M&A deals are just the beginning and more such transactions are likely to be reviewed by the regulators, said an executive at a private equity firm, which has invested in Chinese tech companies.

Alibaba, for example, has submitted a list of dozens of old deals to SAMR, as part of a widening regulatory probe in the sector, two other people with direct knowledge of the matter said. The company declined to comment on the submission.

“Any acquisition will be put under amplified lenses now,” said the PE firm executive, adding the anti-trust crackdown has resulted in a few deals being put on hold.

(Reporting by Kane Wu, Julie Zhu, Cheng Leng, Yingzhi Yang, additional reporting by the Shanghai newsroom; Editing by Sumeet Chatterjee & Shri Navaratnam)