Tencent vs TikTok: A Fight For The Dominant Market Position

Tencent vs TikTok: A Fight For The Dominant Market Position

On February 2nd, 2021, Tiktok alleged that it had filed litigation in Beijing’s Intellectual Court against Tencent over alleged monopolistic behavior, with a claim amounting to a sum of RMB 90 million. As one of the most popular Chinese short video apps, Tiktok has approximately 600 million daily active users. Tencent, as one of the biggest social media giants, is the operator of both QQ and WeChat, two of the most popular social media apps in China.

After the publication of Anti-Monopoly Guide for the Platform Economy Sector (Draft for Comment) (“Anti-Monopoly Guide”) on November 10th, 2020, the dispute between Tiktok and Tencent is supposed to be the first antitrust case arising between two internet giant platforms.

Since 2018, QQ and WeChat have both banned the sharing of links from Tiktok so that the users on the platforms can’t directly watch the videos of Tiktok. Prior to the ban, users could freely share links of Tiktok videos to their friends, and with a simple click they could watch the videos. After the ban, users would have to copy the link and open Tiktok to watch the shared video. It’s clearly evident that such behavior impedes the expansion of Tiktok, with Tiktok claiming that Tencent is abusing its dominant market position to eliminate or restrict competition, which has violated Chinese Antitrust Law.

The dispute between Tiktok and Tencent contains striking similarities to a similar case which happened approximately 10 years ago. In 2011, the owner of a famous anti-virus software “360”, Beijing Qihu Technology Co., Ltd. sued Tencent, again with the claim that Tencent was abusing its dominant position. In this case, Tencent ceased the compatibility of QQ with “360” software, to the point where a user of “360” software cannot use QQ.

In the judgement of the dispute between 360 and QQ, the court comprehensively analyzed the market share, the competition in the relevant market, the ability of the accused operator to control commodity price, quantity or other trading terms, the financial and technical conditions of the operator, the degree of dependence of other operators on the operator in trading, and the difficulty of other operators in entering the relevant market. Finally, the court held that there was no evidence to prove that QQ possessed a dominant position in the market and therefore, Tencent was not found to be in violation of Antitrust Law.

The court specifically pointed out that competition in the Internet environment is highly dynamic, and the boundaries of related markets are far less clear than those in traditional industries. The fact that QQ has a high market share does not necessarily mean that QQ possesses a dominant position in the market. Instead, more attention should be paid to the specific facts and evidence such as market entry barriers, the behavior of operators in the market, and the subsequent impact it may have on competition.

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As per the Anti-Monopoly Guide, to determine whether one company possesses a dominant market position, the court will comprehensively consider:

1) Market share of the operator and the status of competition in the relevant market;

2) Market controllability of the operator;

3) Financial and technical conditions of the operator;

4) Degree of other operators’ transaction dependence on an operator;

5) Degree of difficulty for other operators to enter the relevant market; and

6) Other factors.

The abovementioned factors also take the nature of the internet platform into consideration. For example, in order to determine the market share, the court will consider the proportions of the operator’s transaction amount, transaction quantity, number of users, hits, usage duration or other indicators in the relevant market, as well as the duration of such market share.

Considering the rapid development of internet platforms and the public’s growing aversion towards internet giants in the past decade, whether or not the court will consider Tencent to be possessing a dominant position in the market is questionable.

As a dispute which has raised considerable concern from the public at large, the final judgment may re-clarify how to determine a dominant market position and may influence the business behaviors of other internet companies.

If you have any questions or would like to seek our professional advice in this field, please send an email to info@dandreapartners.com to contact us.

Tencent vs TikTok: A Fight For The Dominant Market Position(图2)