For years Tencent has been a growing force in the video game sector. Through legal and illegal means they have acquired vast holdings in tech companies and video game developers throughout the west. With each acquisition came new accusations of data mining, security breaches, and denials they were being done at the behest of Tencent.
On August 6th, the President of the United States issued an executive order banning WeChat and any transactions to do with Tencent Holdings. For now, the administration has made no official statement regarding how far the measure will go. Leaving many to speculate whether it will impact Riot Games and Epic Games, among several smaller developers, the company has a stake in or ownership over.
Let’s delve into what we know, so we can make a reasonable guess whether this will happen.
Section one of the executive order does emphatically state after 45 days of the passing of the order, all transactions with WeChat and Tencent will be prohibited.
Section 1. (a) The following actions shall be prohibited beginning 45 days after the date of this order, to the extent permitted under applicable law: any transaction that is related to WeChat by any person, or with respect to any property, subject to the jurisdiction of the United States, with Tencent Holdings Ltd. (a.k.a. Téngxùn Kònggǔ Yǒuxiàn Gōngsī), Shenzhen, China, or any subsidiary of that entity, as identified by the Secretary of Commerce (Secretary) under section 1(c) of this order.
Section 1.B goes on to provide exceptions for pre-existing contracts or licenses made prior to the issuance of the order.
(b) The prohibition in subsection (a) of this section applies except to the extent provided by statutes, or in regulations, orders, directives, or licenses that may be issued pursuant to this order, and notwithstanding any contract entered into or any license or permit granted before the date of this order.
Section two renders and define any actions attempting to circumnavigate or circumvent this order as illegal under the emergency powers act, which is outlined in section five.
Sec. 2. (a) Any transaction by a United States person or within the United States that evades or avoids, has the purpose of evading or avoiding, causes a violation of, or attempts to violate the prohibition set forth in this order is prohibited.
(b) Any conspiracy formed to violate any of the prohibitions set forth in this order is prohibited.
Where analysts are drawing confusion is in the intentionally vague and broad wording of the order. Most, as highlighted by Market Watch, are in agreement that this order does impact the gaming sector or has the potential to impact game companies owned by Tencent.
Trump’s executive order to ban US individuals from doing business with Tencent will affect:
Riot Games, Grinding Gear Games (100%)
Supercell (84.3%)
Epic Games (40%)
Funcom (29%)
Paradox Interactive, Ubisoft, Activision-Blizzard (5%)
Discord (undisclosed percentage)— Ian Miles Cheong (@stillgray) August 7, 2020
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Orders of this nature are typically written vaguely to give the government broad sweeping capacities. At the same time, the government is not clueless as to how far they believe the order allows them to go. White House legal teams already have legal arguments prepared to justify and defend the implementation of this executive order and the scope of its authority and actions.
That being said, one journalist has a differing opinion from the majority. Sam Dean is a journalist for the L.A Times, the outlet every outlet either quotes or references in their claims this ban will not impact the gaming industry.
This was pretty much impossible to tell from the EO itself—I also had a 😲 moment that they were roping in Riot et al when I first read it—but “we just mean WeChat” is the WH line for tonight.
But banning all transactions on/with WeChat alone is still WILD.
— Sam Dean 🦅 (@SamAugustDean) August 7, 2020
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Given the two positions, which is the accurate one? Well, looking at section 1B we can see prior licenses and contracts are protected. Any arrangement prior to the passage of the executive order cannot be interfered with, but going forward, these agreements cannot be expanded or compounded. 1A is fairly clear that transactions with Tencent are officially banned under this order.
Similarly, in May, the United States Government banned companies from important technology developed or produced by Huawei. The United Kingdoms have also banned the company from their 5g infrastructure. Establishing a precedent for the government to ban Chinese tech companies from operating in the United States and United States companies from working in conjuncture with these companies.
As the United States is in a Cold War with China with a significant potential that it will go hot in the next couple of years, it is unlikely the US government will permit China to continue utilizing soft power to gain further inroads into the United States.
What will happen? Likely Tencent and related companies or through related companies, will fight the order in courts. After they lose, Tencent will sell off their holdings in the various companies before the US government seizes them as hostilities increase between the two nations.