Tencent Holdings Ltd (0700.HK) is negotiating deals with a US national security group that would allow it to retain stakes in US video game developers Riot Games and Epic Games, according to people familiar with the matter.
Tencent has been in talks with the Committee on Foreign Investment in the United States (CFIUS), which has the power to order the Chinese tech giant to divest the US stakes, since the second half of last year, the officials said. sources.
CFIUS investigated whether Epic Games and Riot Games ‘processing of their users’ personal data poses a risk to national security because of their Chinese ownership, the sources added.
Tencent has a 40% stake in Epic Games, the maker of the popular Fortnite video game. Tencent also bought a controlling stake in Riot Games in 2011 and acquired the rest of the company in 2015. Riot Games is the developer of “League of Legends”, one of the most popular desktop games in the world.
Tencent is negotiating risk mitigation measures with CFIUS so that it can keep its investments, the sources say. Details of the proposed measures could not be learned. They usually involve limiting the owner of a business to operations that have national security implications. They often call for the appointment of independent auditors to monitor the implementation of these agreements.
One of the sources said that Epic Games does not share any user data with Tencent.
The sources warned that there was no certainty that Tencent would make deals to retain its investments and asked not to be identified as the matter is confidential.
Tencent, Epic Games and a CFIUS representative at the US Treasury Department declined to comment.
A spokesperson for Riot Games said the Los Angeles-based company operates independently of Tencent and has implemented “best practices” to protect player data. He declined to comment on Riot Games’ discussions with CFIUS.
The CFIUS has cracked down on Chinese ownership of US tech assets in recent years, amid escalating tensions between Washington and Beijing over trade, human rights and intellectual property protection. U.S. officials have expressed concern that personal data of U.S. citizens could end up in the hands of the Chinese Communist Party government.
President Joe Biden’s administration has maintained the hawkish stance against China inherited in January from his predecessor Donald Trump, but with more attention to geopolitical issues such as the future of Taiwan and Hong Kong, as well as the persecution of Uyghurs by China in Xinjiang.
Yet many of CFIUS ‘key roles have yet to be filled. This provided a reprieve for Chinese ByteDance, which was ordered by Trump last year to sell its popular short video app TikTok, but has hesitated in a transaction that allegedly involved Oracle Corp (ORCL.N) and Walmart Inc (WMT. NOT). CFIUS did not seek to enforce the divestiture order under Biden.
Epic is locked in a legal battle with Apple Inc (AAPL.O) to gain access to the iPhone maker’s app store. It alleges that Apple is forcing developers to use its built-in payment systems – which charge commissions of up to 30% – and to submit to app review guidelines that discriminate against competing products. ‘Apple.
Apple claims that Epic Games broke its contract by introducing its own payment system built into Fortnite to bypass Apple’s commissions. He says the way he runs the App Store inspires confidence in consumers to open their wallets to unknown developers. Read more
Tencent’s vast businesses include video games, content streaming, social media, advertising, and cloud services. China has sought in recent months to curb the economic and social power of Tencent and other internet companies such as Alibaba Group Holding Ltd (9988.HK), as part of a crackdown backed by President Xi Jinping. Reuters reported last week that Beijing was preparing a substantial antitrust fine for Tencent. Read more
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