Excluding China Tencent in talks with US to preserve gaming investment resources

Tencent Holdings Limited (0700.HK) He’s negotiating deals with the US National Security Council that would allow him to retain interests in US video game developers Riot Games and Epic Games, according to people familiar with the matter.

The sources said Tencent has been in talks with the United States Foreign Investment Commission (CFIUS) since the second half of last year, which has the power to order the Chinese tech giant to relinquish US interests. .

The sources added that CFIUS has investigated whether Epic Games and Riot Games ‘processing of their users’ personal data poses a risk to national security because of their Chinese ownership.

Tencent owns a 40% stake in Epic Games, the popular Fortnite video game maker. Tencent also bought a controlling stake in Riot Games in 2011 and took over the rest of the company in 2015. Riot Games is the developer of “League of Legends,” one of the world’s most popular desktop games.

Tencent is negotiating mitigation measures with CFIUS so that it can maintain its investment, sources said. It was not possible to know the details of the proposed measures. This usually involves isolating the business owner from activities that affect national security. They often require the appointment of independent auditors to verify the implementation of these agreements.

A source said that Epic Games did not share user data with Tencent.

Sources have warned that there is no certainty that Tencent will enter into agreements to retain its investment and requested anonymity as it is a matter of confidentiality.

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 growing 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 fall into the hands of the Chinese Communist Party government.

President Joe Biden’s administration has maintained the tough stance against China inherited from his predecessor Donald Trump in January, but with a greater focus on 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 ‘main roles have yet to be assigned. This provided an ultimatum for Chinese ByteDance, which last year asked Trump to sell the popular TikTok short video app, but turned down a deal involving Oracle Corp. (ORCL.N) And Wal-Mart (WMT.N). CFIUS did not attempt to enforce a divestment order under Biden.

Epic is in a legal battle with Apple Inc. (AAPL.O) Go to the iPhone manufacturer’s app store. He says Apple requires developers to use integrated payment systems – which charge commissions of up to 30% – and provides app review guidelines that discriminate against products that compete with Apple products.

Apple claims that Epic Games broke its contract by introducing its integrated payment system in Fortnite to bypass Apple’s commissions. She says the way the App Store works inspires confidence in consumers to open their wallets to unknown developers. Read more

Tencent’s vast business includes video games, content streaming, social media, advertising, and cloud services. In recent months, China has sought the economic and social power of Tencent and other internet companies such as Alibaba Group Holding Ltd. (9988.HK), In a campaign supported by President Xi Jinping. Reuters reported last week that Beijing was preparing a major antitrust fine for Tencent. Read more

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