(Bloomberg) -- Tencent Holdings Ltd. removed two directors it appointed to the board of Epic Games Inc. after the US Justice Department deemed the positions a violation of antitrust laws.
China’s most valuable company owns both a minority stake in Epic and a direct competitor in its Riot Games Inc. subsidiary, giving rise to concern about antitrust violations, the DOJ said in a statement Wednesday. Tencent relinquished the seats as well as its unilateral right to appoint directors or observers, according to the statement.
The two directors stepping down are David Wallerstein and Ben Feder, Epic Games said in an email. Wallerstein was a longtime Tencent executive before taking on an advisory role this year, while Feder is managing partner of Tirta Ventures.
Epic Games is one of the gaming industry’s key companies, producing the Unreal Engine that’s widely used for building advanced 3D graphics and in-game physics. It’s also the creator of Fortnite, Rocket League and other globally popular games, and it has a PC game distribution platform called Epic Games Store that competes with Valve Corp.’s Steam. Tencent and PlayStation maker Sony Group Corp. have both invested significantly in Epic, whose technology they rely on.
The Department of Justice said it has amped up enforcement and oversight of potential violations of Section 8 of the Clayton Act, which prohibits directors from serving on the boards of competing companies such as Epic and Riot Games, the latter being the creator of multiplayer online games like League of Legends.
“Scrutiny around interlocking directorates continues to be an enforcement priority for the Antitrust Division,” Deputy Director of Civil Enforcement Miriam Vishio said in the DOJ’s statement. “Our increased enforcement around Section 8 over the last few years has achieved substantial results.”
Tencent is one of the world’s most aggressive game investors, having acquired stakes in the studios behind hits like Clash Royale, Elden Ring and Path of Exile. In 2012, the Shenzhen-based company paid $330 million for a large stake in Epic, which gave it the right to appoint directors.
--With assistance from Cecilia D'Anastasio and Josh Sisco.
©2024 Bloomberg L.P.