(Bloomberg) -- China ordered Tencent Holdings Ltd. and 13 other developers to rectify problems related to pop-ups within their apps, adding to a wide-ranging crackdown on the country’s tech sector.
The companies must address the “harassing” pop-up windows, which could contain misleading information or divert users away from the apps, the Ministry of Industry and Information Technology said in a statement on Wednesday. The 14 services, including an e-books app by Tencent’s QQ and a video platform by Le.com, will have to fix the problems by Aug. 3.
“Failure to abide by regulations” will not be tolerated and will be “penalized” accordingly, said the ministry.
Pop-ups, often used for advertising, are just the latest targets in a series of government crackdowns that have ranged from antitrust to data security, as Beijing seeks to rein in the tech giants’ influence over most of everyday life. The crackdown has stepped into high gear in recent days after regulators announced their toughest-ever curbs on the online education sector and issued edicts governing food delivery, fueling a rout in Chinese tech stocks.
The statement by MIIT comes days after the regulator announced a six-month crackdown on illegal online activities. The ministry on Monday said it will take steps to root out violations involving pop-ups, data collection and storage as well as the blocking of external links.
Other regulators including the Cyberspace Administration of China have also pledged to tighten restrictions on misleading and explicit content used for marketing purposes. The watchdog said such material will be subject to harsher oversight, issuing fines against companies like Tencent, Kuaishou Technology and Alibaba Group Holding Ltd. for offensive content.
Tencent shares sank more than 5% Wednesday, adding to a three-day, 18% sell-off. The company, China’s biggest by market value, on Tuesday suspended registrations for its WeChat services to rectify illegal behavior online.
What Bloomberg Intelligence Says:
The moves to fix pop-up ads and other misleading marketing content may extend beyond games and lead to Tencent, Alibaba and peers having to increase compliance costs to weed out misleading content. This could pose a headwind to profitability as those efforts are introduced, similar to the drop in margins Facebook experienced when it ramped up its content moderation efforts in 2019
-- Matthew Kanterman, senior analyst
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