Chinese gaming giant Tencent is in talks with a major US security panel over its investments in US gaming companies Epic Games and Riot Games. The committee is concerned about potential national security risks in the way the companies share their data.
Why is Tencent having these discussions?
According to Reuters, Tencent has been locked in discussions with the CFIUS (Committee on Foreign Investment in the United States) since the second half of 2020. Tencent owns League of Legends developer Riot Games outright, and has a 40% stake in digital storefront operator and Fortnite developer Epic Games. The CFIUS (Committee on Foreign Investment in the United States) is investigating whether these studios' handling of user data constitutes a security risk due to the Chinese giant's investment in both companies.
Reuters' sources say that Tencent is "negotiating risk-mitigation measures" to allow it to keep its investments. We don't know what those measures would entail, but they'd likely involve keeping Tencent as far away as possible from data management and other aspects of company operation with national security implications. It's also likely that the CFIUS would want independent adjudicators to monitor Epic and Riot's handling of user data to ensure it isn't being routed back to Chinese authorities.
What does this mean for Tencent, Epic, and Riot?
When asked for comment by Reuters, a Riot Games spokesperson said that the company's operations aren't affected by Tencent's investment. It's also worth noting one of Reuters' sources said that Epic doesn't share user data with its stakeholder. However, the CFIUS has been undertaking more and more rigorous reviews of Chinese investment in US companies for the last few years, and this examination is part of that ramping up. The outcome will depend on how Epic and Riot share user data with Tencent (if they do at all).
In the short term, don't expect Epic or Riot services to be disrupted by this. As you might expect, these processes can take a lot of time, so it'll be a while before any kind of resolution comes about. Still, this isn't going to be much fun for Epic, since it's currently also embroiled in a legal battle with Apple over its App Store distribution policies. In addition, adding to the Chinese company's woes, CCP leader Xi Jinping is cracking down on Chinese tech companies, aiming to curb what Beijing sees as the accelerating power and influence of China's tech sector. We'll have to wait and see how these talks proceed.
How do you feel about these talks between Tencent and the CFIUS? Let us know in the comments below!