China to Probe DreamWorks Animation Takeover by Comcast

Kung Fu Panda Dreamworks
Courtesy of Dreamworks Animation

China is to launch an anti-trust investigation into the recent takeover of DreamWorks Animation by Comcast.

“Recently the Ministry of Commerce received complaints regarding Comcast’s decision to buy out DreamWorks claiming that the deal would hurt competition in the Chinese market,”  Shen Danyang, a spokesman for the ministry, told reporters on Friday, according to Reuters. “MofCom will investigate this case based on anti-monopoly laws,” Shen added.

The announcement of the probe came as world leaders arrived in the Chinese city of Hangzhou for the latest G20 Summit weekend. The ministry also revealed that it would probe another deal involving U.S. interests, that sees Chinese taxi hailing service Didi Chunxing acquire Uber China.

Comcast announced the $3.8 billion takeover in April. The deal was cleared by the U.S. Justice Department and was announced as completed at the end of last month (Aug. 22.) A new management team was installed the following day, reporting to the Comcast hierarchy and to Universal Pictures chairman Donna Langley.

China enacted its anti-monopoly laws in 2008. The laws give the government scope to probe foreign deals even if no Chinese companies are involved. Neither DreamWorks Animation or Comcast are Chinese companies, but DreamWorks Animation is a joint venture partner in Oriental DreamWorks.

Shanghai-based Oriental Dreamworks is an operation that is intended to be a fully-fledged animation production studio, spanning feature film, TV series and web content. To date its only completed feature movie is “Kung Fu Panda 3.” The company owns 45% of Oriental DreamWorks, alongside Li Ruigang’s powerful China Media Capital. As well as a smart businessman, Li is considered an astute political animal with connections reaching to he highest levels of the ruling Communist Party.

The spokesman did not identify the source of the complaints or the nature of the threat to competition. However, it is just as likely that theme parks are the area of concern as animation. Comcast is currently constructing a Universal theme park near Beijing, that is scheduled to open in 2019 or 2020. DreamWorks Animation is a partner in the $2.4 billion Dream Center that will open in Shanghai in 2017. The other partners in the venture are CMC and Hong Kong property group Lan Kwai Fong.

The takeover would give Comcast significant minority stakes in two of the three biggest theme parks in China that are backed by foreign corporations. Disney’s Shanghai Disney Resort opened in June and was given a verbal savaging by Wang Jianlin, chairman of China’s Wanda group, which is building its own string of theme parks around China. Wang used an interview on state television to say that Shanghai Disneyland was not welcome or necessary in China.

In addition to Comcast’s ownership position in the tangible assets that the Dream Center and the Universal Beijing park represent, the regulators may choose to look at the ownership of the intellectual property employed at the parks. Universal has “Jaws,” “Jurassic Park” and “Psycho” franchises, and has already launched “Despicable Me” rises based on “Minions.” Under a recent deal with Nintendo, Universal licensed a string of other properties based on its most popular video games. DreamWorks Animation provides it with “Shrek,” “Madagascar,” “How to Train Your Dragon” and Chinese-themed “Kung Fu Panda.”