Epic Games & Other Tencent Gaming Investments Receive U.S. National Security Scrutiny

Sep 17, 2020 17:25 EDT
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Chinese conglomerate Tencent came under the scrutiny of the U.S. Government earlier today as its gaming investments were asked about the security of their data management protocols. Tencent, which is one of the largest video game vendors in the world due to the multitude of businesses that it owns, has several operations in America, with these having received letters from the Committee on Foreign Investment in the United States (CFIUS) reports Roundhill Investments through its microblogging platform Twitter's channel.

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The move steps up the current administration's actions against technology companies that authorities believe pose a risk to the national security of the United States. Government concerns about the security of the personal information of millions of Americans that use popular video-sharing social networking application TikTok have resulted in the authorities issuing an executive order that prohibited any entity inside the U.S. from engaging with ByteDance Ltd. - a Chinese company that owns TikTok.

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At the same time, an order was also issued that banned WeChat and other entities in the U.S. from dealing with Tencent, and today's request seems to be a follow up on these earlier actions. According to the details, gaming companies in which Tencent has an ownership stake were asked for their information security protocols, with the CFIUS sending letters of request to developers including Epic Games and Riot Games.

This request could be the first of many that result in closer scrutiny of the risk that authorities deem any potential lapses in security could result in personal information making its way to China. It seems to follow the narrative that the current administration has followed with its executive orders aimed at bringing TikTok under American ownership.

 

Should the CFIUS determine that the personal data of gamers using Epic and other developers' products is at risk, then demands to remove Tencent's influence of the companies could also surface. Today's report also comes as rumors of TikTok going public on an American stock exchange come to light, adding a new twist to the application's acquisition that has witnessed both Microsoft Corporation and Oracle Corporation surface as potential suitors.

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Epic Games, of which Tencent has a 40% ownership stake, owns the popular Fortnite gaming application and is currently in a legal tussle with the Cupertino tech giant Apple Inc, could also be hard-pressed to find an alternative investor that would not carry the risk of having to comply with the Chinese government's requests for data.

These concerns have also fuelled the American rhetoric against telecommunications networking gear for next-generation 5G cellular networks from Chinese company Huawei Technologies Inc. Officials have argued that data passing through this equipment will fall under the ambit of China's controversial National Intelligence Law which binds all companies headquartered in the country to share assets with Chinese security agencies should the need arise.

So far, the request seems to concern itself only with the security of user data from attacks and as such does not provide a reason to concretely predict similar action against these companies that mirrors that taken against TikTok and WeChat.

In addition to owning a stake Epic Games and Riot Games, Tencent also owns shares of developers in Norway, New Zealand, Malaysia and France. As the 45 days given to TikTok to find an alternate owner start to reach an end the intent of the U.S. government behind sending the data security requests to the game developers will also start to become clear.

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