China’s Tencent negotiates Riot & Epic Games ownership with US amid national security concerns

In the wake of national security concerns over data privacy, Chinese company Tencent are reportedly negotiating with the US government in order to maintain their ownership stakes in Riot Games and Epic Games.

Since late-2020, the United States of America’s Committee on Foreign Investment (CFIUS) has been pushing for Tencent Holdings Ltd, a Chinese company, to divest holdings in both Riot and Epic Games.

Tencent, a Chinese technology conglomerate holding company, owns 100% of Riot, 40% of Epic, and minority stakes in other major North American companies as well (such as Activision Blizzard, Ubisoft, Discord, and Roblox). 

Considering the popularity of Riot’s titles (e.g. League of Legends) and Epic’s Fortnite battle royale, US governmental pressure has maintained that Tencent’s data collection is a foreign security concern. But Reuters’ Greg Roumeliotis reports that the company is pushing back and working to maintain its investments.

According to Reuters sources, Tencent are “negotiating agreements with a U.S. national security panel” in order to maintain ownership over Riot and Epic Games. This continues ongoing discussions, dating back to 2020, surrounding data collection and privacy concerns for American citizens.

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As sources specify, the chief concern for the CFIUS is what Tencent’s data collection practices look like and if their “handling of the personal data of their users constitutes a national security risk because of their Chinese ownership.”

At the moment, it is unclear exactly how these negotiations are going — but there are some reasonable expectations based on past precedent.

The fact that discussions are ongoing suggests that various options remain at play. The US government has a publicly visible aversion to foreign data collection as well as growing tension with the Chinese government, both evidenced in news stories throughout the past couple years.

While Epic Games maintain that they do not share any user data with Tencent, those same assurances cannot hold fast for Riot — of which Tencent enjoys 100% ownership.

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As far as suggested solutions in order to maintain Tencent’s ownership, there are few details but several possibilities. 

The majority of those considerations will surround continuing Tencent’s ownership, but limiting the company’s involvement in operations or ensuring independent auditors oversee data management.