According to people familiar with the situation, Tencent Holdings is negotiating deals with a US national security panel, that would allow it to retain its ownership stakes in the US video game developers Riot Games and Epic Games. Since the second half of last year, Tencent has been in negotiations with the Committee on Foreign Investment in the United States (CFIUS), which has the power to order the Chinese technology giant to divest its US assets.
According to the reports, CFIUS is investigating whether Epic Games and Riot Games' treatment of their users' personal data poses a national security danger due to their Chinese possession. Epic Games, the developer of the iconic video game Fortnite, has a 40% interest in Tencent. In 2011, Tencent bought a controlling stake in Riot Games, and in 2015, it bought the remainder of the business. Riot Games is the creator of "League of Legends," one of the most popular pc games in the world.
According to the reports, Tencent is discussing risk-mitigation plans with CFIUS in order to retain its investments. It was impossible to discover the specifics of the new steps. They usually include isolating a company's owner from activities with national security consequences. They also demand that independent auditors be appointed to oversee the execution of these agreements. According to one of the articles, Epic Games does not share any user data with Tencent. Tencent would not always be able to retain its finances, according to the sources, who asked not to be named because the matter is private.
Tencent, Epic Games, and a Treasury Department CFIUS official, both declined to comment. Riot Games, headquartered in Los Angeles, runs independently of Tencent and has adopted "industry-leading policies" to secure player privacy, according to a spokeperson . He wouldn't say much about Riot Games' talks with the CFIUS. CFIUS has been cracking down on Chinese control of the U.S. technological properties in recent years, as tensions between Washington and Beijing have risen over immigration, human rights, and intellectual property security. Officials in the United States have voiced fear that sensitive information about Americans could end up in the possession of China's Communist Party government.
President Joe Biden's administration has retained his predecessor Donald Trump's hawkish posture against China, but with a greater emphasis on strategic questions such as the future of Taiwan and Hong Kong, as well as China's repression of Uyghurs in Xinjiang. However, several main CFIUS positions are yet to be filled. ByteDance, which was requested by Trump last year to sell its famous short video app TikTok, but baulked at a deal that would have included Oracle Corp and Walmart Inc, which have been granted a reprieve. Under Biden, CFIUS has not attempted to execute the divestiture directive.
Epic is battling Apple in court for rights to the iPhone maker's app store. It claims that Apple pressures developers to use its in-app payment schemes, which charge up to 30% fees, and to follow app-review rules that favour Apple's own products over competitors. Epic Games allegedly breached their deal by introducing its own in-app payment scheme in Fortnite to avoid Apple's fees, according to Apple. It claims that the way it operates the app store encourages customers to trust unknown developers with their money. Video gaming, online streaming, social media, advertisements, and cloud computing are only a few of Tencent's many companies. In a crackdown backed by President Xi Jinping, China has aimed to limit Tencent's economic and social influence, as well as that of other internet firms like Alibaba. Last week, Reuters announced that Beijing was expecting a large antitrust fine for Tencent.