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POLITICS & LAW

By Huang Yuxin, Wang Mengyao and Zhao Runhua / Mar 22, 2019 06:42 PM / Politics & Law

Photo: VCG

Photo: VCG

A police officer is currently being tried in Hunan province for taking 42 million yuan ($6.27 million) in bribes over seven years in order to change individuals’ driving records.

Officer Xiao, while policing traffic in the province’s capital city of Changsha, worked with agents to find drivers who wished to scrub their records to avoid fines and punishment, charging them for the service.

Xiao also illegally granted violators’ vehicles with “punishment waivers” – which are supposed to be exclusively given to special-purpose vehicles such as police cars and ambulances – in exchange for bribes, a local court trial says.

According to a deal Xiao had with one agent surnamed Zhong, the former could take up to 2,250 yuan per each record-change request.

From 2010 to 2017, Xiao took 1,055 bribes from nine agents including Zhong and illegally acquired a total 42.46 million yuan, including 32.11 million yuan from Zhong alone.

During the trial on March 1, Xiao admitted to all the charges, and burst into tears with regret. No final court-decision has been made so far.

Related: Murder Conviction of Former Police Chief Upheld
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POLITICS & LAW

By Zhao Runhua and Tanner Brown / Mar 21, 2019 04:22 PM / Politics & Law

Photo: VCG

Photo: VCG

Imagine a private citizen felling trees and damaging environmental structures in Yellowstone National Park, to illegally build a bizarre villa that houses stuffed animals and sculptures. Moreover, this rogue building is closed to visitors.

Well in China, these dreams can come true.

In Heilongjiang province, in China’s northeast, lies the government-protected Zhangguangcai Ling forest zone — an expanse of trees and wildlife.

Yet in the midst of this wild reserve, a complex of ornate, ancient-Chinese-style buildings have been built over the last 14 years, without approval, and with scant information about who or what was behind them, or what their purpose was for.

The staying-power of this unauthorized complex is also a testament to the failure of local officials to resolve the issue.

Three times local officials have ordered “Cao Garden,” as it is called, to be dismantled and for the backers to pay fines. But the buildings still stand, with their artifacts gathering dust.

But the mystery may be coming to an end. On Tuesday, a high-level provincial conference urged the local Mudanjiang city government to set up an investigation team to inspect and “seriously” punish those responsible. Officials said the investigation results and punishment decisions will be released publicly.

Some news has already emerged. CCTV reported yesterday that a private company owned by a man named Cao Bo is behind the complex. Cao acquired the rights to operate a government-owned horse ranch at the location, but with no additional changes.

Cao denied the villa complex is private, and asserted he had always been wanting to giving it back to society as a gift. He said the reason why it remained closed was because of the incomplete construction and government’s punishment notices.

Cao and the case are still under investigation.

View more photos of the villa complex here.

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By Zhao Runhua / Mar 21, 2019 03:49 PM / Politics & Law

Head of the Central Commission for Discipline Inspection, Zhao Leji. Photo: China News Service

Head of the Central Commission for Discipline Inspection, Zhao Leji. Photo: China News Service

China will soon begin another round of Communist Party disciplinary inspections — the third since the party re-elected its leadership in 2017.

The inspections will look into three central government departments and 42 state-owned enterprises (SOEs) under the central government, according to state-run Xinhua News Agency.

Targets include the State-owned Assets Supervision and Administration Commission, the National Energy Administration, and the State Administration of Science, Technology and Industry for National Defense. The SOEs range from telecom and aerospace technology to investment firms.

Zhao Leji, secretary of the Party’s corruption watchdog — the Central Commission for Discipline Inspection — and head of the inspection round, said the SOEs must improve “political awareness” and strengthen related supervision to better implement Beijing’s mandates.

According to People’s Daily, the inspection round will be carried out by 15 inspection work groups. 

Disciplinary inspections have long been a crucial part of the Party’s anti-corruption campaign, looking into suspicious cases and requiring government departments and SOEs to respond to inspection feedback with actions. This very often leads to exposure of corruption cases which could put high-level officials under harsh punishment.

During the first inspection round last year, the National Bureau of Statistics further investigated into 131 fixed income investment projects, and removed three bureau officials from their positions, to respond to the inspection group’s criticism. Eastern China’s Shandong province punished 3,095 Party members for the same inspection round.  

Related: Shaanxi Anti-Corruption Official Under Investigation — for Corruption

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By Cheng Siwei and Liu Jiefei / Mar 20, 2019 07:15 PM / Politics & Law

China will try to complete drafting laws on taxes, including the value-added tax (VAT) and consumption tax, this year, the Ministry of Finance said Wednesday.

VAT is the largest source of government tax revenues, and will be a major part of the nearly 2 trillion yuan ($300 billion) tax and fee cuts this year.

Beijing promised to cut the VAT rate to 13% from 16% for manufacturers, and cut the rate for transportation and construction companies to 9% from 10%, according to the government work report released earlier this month.

Related: Why Value-Added Tax Cuts Are Essential to Helping Businesses

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By Lin Yunshi and Zhao Runhua / Mar 20, 2019 04:01 PM / Politics & Law

Lu Xinning (left). Photo: VCG

Lu Xinning (left). Photo: VCG

The former deputy editor-in-chief at state-run People’s Daily, Lu Xinning, has been appointed deputy director at the Liaison Office of the Central People’s Government in the Hong Kong Special Administrative Region — the communication channel between Beijing and Hong Kong, according to a Tuesday announcement.

The Office is widely seen as Beijing’s formal representation in Hong Kong.

Lu, 52, graduated from the country's prestigious Peking University with a degree in Chinese Language and Literature, then worked for People’s Daily for almost 28 years until the new appointment.

In 2009, Lu became the first woman to head the People’s Daily’s commentaries department. She was promoted to deputy editor-in-chief in 2014.

During her years at the outlet, Lu was a major contributor to commentary articles bylined “Ren Zhongping (任仲平)”, an internal writers’ group well-known for opinions on social issues and policy.

Lu also led interpretations of Xi Jinping’s quotes for “Xi Jinping Yongdian (习近平用典)”, a collection of the president’s sayings and ideas adopted from ancient Chinese classics.

Follow all of China’s high-level personnel changes at our Movers and Shakers section.

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By Zhao Runhua / Mar 20, 2019 02:30 PM / Politics & Law

Photo: VCG

Photo: VCG

It’s still not clear if the recent school scandal involving spoiled cafeteria food was real or exaggerated, but either way, changes are afoot.

A new set of rules will require pre-higher education schools, including kindergartens, to set up a “companion mechanism” in which school leaders must dine with students and keep records of the meals. The rules also allow parents to dine with their children and offer feedback to schools.

China issued a 64-article rule last month — before the scandal — putting responsibility on the head of an education institution for food quality, including from outsourcing suppliers. It’s unclear if the dine-with-student rule was in place before the scandal, as the new guidelines were only publicly released yesterday.

In that scandal, a private school in Chengdu last week was found to be providing food that failed to meet safety standards. Photos of spoiled food circulated online and parents were infuriated. Hundreds of students from the school were sent to local hospitals for check-ups, and three were hospitalized. The school’s principal was even fired.

But days later, authorities alleged that the photos were faked, after their investigation found that only one out the 18 samples collected from the Chengdu No. 7 Experimental High School’s canteen did not meet safety standards.

Related: Authorities Allege School Food-Safety ‘Scandal’ Based on Fake Photos

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By Sun Liangzi and Ren Qiuyu / Mar 18, 2019 01:03 PM / Politics & Law

Quan Wangjun

Quan Wangjun

Another Shaanxi official has been placed under investigation for corruption. His position? Head of a city’s anti-corruption department.

Shaanxi’s corruption watchdog announced yesterday that Quan Wangjun, the director and Communist Party secretary of the Xianyang City Discipline Inspection Commission, has been placed under investigation for “serious violations of discipline and law,” a euphemism for corruption.

According to one person with knowledge of the information, who wished to remain anonymous due to the sensitivity of corruption investigations, said Quan, 57, had been aware of the impending investigation and had considered committing suicide. On March 10, a suicide note he had allegedly written was circulated online.

Quan is the second high-level official in Shaanxi’s disciplinary system to be investigated recently. In August, former director of the Corruption Prevention Department of the Shaanxi Discipline and Inspection Commission, Hu Chuanxiang, was placed under investigation. He was expelled from the Communist Party in February.

Related: Former Shaanxi Chief Under Graft Investigation

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By Qian Tong and Zhao Runhua / Mar 15, 2019 08:04 PM / Politics & Law

Photo: VCG

Photo: VCG

Premier Li Keqiang expressed cautious open-mindedness toward the future of China’s sharing economy during a Friday press conference of the Two Sessions, China’s highest-level annual political gathering.

In his speech, Li acknowledged the sharing economy’s positive impact on employment opportunities and life in China. He also said that internet-related businesses and the sharing economy would not be used to “camouflage” fraud.

As China’s internet user base and online consumption habits grow, sharing-economy projects can attract sizable investment, but are often risky. Shared-bike company Ofo’s fall from grace raised doubts recently regarding the sharing economy models’ profitability.

Li said that the market would test new sharing-economy models and naturally eliminate some, and that “fair” governance can further guide the industry’s “healthy development.”

Ultimately, he said, the sharing economy still offers “very big potential.”

Related: Investors Grow Wary of Sharing Economy Plays

 


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By Zhao Runhua / Mar 15, 2019 12:15 PM / Politics & Law

Photo: VCG

Photo: VCG

After decades of what some called an outdated framework, China today passed a sweeping new Foreign Investment Law.

China says the law will improve the openness, transparency and predictability of the investment environment, establish equal treatment for foreign and domestic investors, and bar forced technology transfers — a focal point of trade tensions with the U.S.

China’s top legislature, the National People’s Congress (NPC), passed the law with an overwhelming majority: 2,929 yes votes, eight no notes, and eight legislators abstaining.

The law will go into effect on Jan. 1, 2020. The final version is not available to the public, but it was reported that only one change was made to last week’s draft version: an item prohibiting staff working for administrative departments from leaking confidential information, and specifying punishment for such violations.

The NPC has gathered this week in Beijing as part of China’s highest-level annual political gathering, called the Two Sessions, in which legislators and delegates confer for two weeks to review China’s recent development and outline its future policy goals. After the meeting closes today, new amendments may be added to the foreign investment law, as long as they do not contradict “fundamental principles” of the law.

In addition to the law’s mandate of “equal treatment” of foreign and domestic companies, another notable element includes making nationwide the so-called negative list — which defines which industries or activities foreign businesses are able to operate in. Before the new law, the negative list had not been implemented uniformly across the country.

Related: In-Depth: New Foreign Investment Law Goes on Fast Track

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By Shan Yuxiao and Zhao Runhua / Mar 12, 2019 06:21 PM / Politics & Law

Sun Zhengcai appears in a court in Tianjin on April 12, 2018. Photo: CCTV

Sun Zhengcai appears in a court in Tianjin on April 12, 2018. Photo: CCTV

Are more officials now behaving themselves?

The Supreme People’s Court of China closed roughly 28,000 corruption and duty-dereliction cases involving approximately 33,000 officials in 2018, Chief Justice Zhou Qiang informed top legislators at China’s annual NPC meetings on Tuesday.

The figures declined 50% and 56.58% year-on-year, respectively.

Zhou attributed the decline to the government’s sweeping anti-corruption crackdown. In a high-profile case, Sun Zhengcai, the former Chongqing Party chief and member of China’s key decision-making Politburo, was sentenced to life imprisonment last May for taking 170 million yuan ($27 million) in bribes, which Zhao cited as demonstrative of the success of China’s campaign.

Including Sun, 18 out of the 33,000 officials involved in corruption cases were at or above the ministerial level, and an additional 2,466 officials were convicted of offering bribes, Zhou’s report said.

Related: Former Rising Political Star Sun Zhengcai Gets Life in Prison

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By Liu Shuangshuang, Shan Yuxiao, and Zhao Runhua / Mar 12, 2019 11:55 AM / Politics & Law

Fan Bingbing. Photo: VCG

Fan Bingbing. Photo: VCG

A scandal in China could ruin a celebrity's career — and a company's business.

In 2018, star Fan Bingbing’s tax evasion scandal emerged. Soon after, the fiscal revenue and profit of Talent Television and Film, a producer behind Fan’s film “Legend of Ba Qing (巴清传),” dropped dramatically.

Talent Television and Film said that the company failed to profit because no partners were willing to screen Fan’s film, for fear of being blamed for giving limelight to an alleged law-breaker.

One famous screenwriter, who is also a CPPCC delegate to China’s highest-level annual meetings going on this week, drafted a proposal with 30 other delegates to establish a “celebrity blacklist” to protect lawful interests of companies like Talent.

Zhao said that “celebrity scandal risks can be hard to predict. This could bring significant loss to investors, and will affect other innocent actors and actresses.” She added that it’s unfortunate that TV series and films starring such celebrities will often be “killed” permanently by the industry to avoid audiences' boycotts.

The celebrity blacklist would keep records on scandal-involved celebrities, and allow further punishment decided by the industry and legal departments. This includes setting up an industry rating system to evaluate the seriousness of a celebrity’s scandal.

The proposal also advocates that a TV series or film starring a scandal-ridden celebrity might be prohibited from being screened, but for no more than six months. Zhao said the proposal will allow investors to demand material compensation from the celebrities.

Related: Tax Crackdown Sends Chill Through Movie Biz

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By Xiao Hui, Xu Heqian and Zhao Runhua / Mar 08, 2019 05:16 PM / Politics & Law

Photo: VCG

Photo: VCG

Beijing has announced its support for embattled Huawei in its efforts to sue the U.S. government.

Wang Yi, China’s Minister of Foreign Affairs, said Friday that China supports the company and its Chief Financial Officer Meng Wanzhou in “seeking legal redress to protect their own interests and refusing to be victimized like silent lambs.”

Wang said that it would be obvious to "any fair and unbiased person" that the recent U.S. actions are "by no means a purely judicial case, but rather a deliberate political case to bring them down."

"China has and will continue to take all necessary measures to resolutely protect the legitimate and lawful interests of Chinese businesses and citizens," the minister said, adding that it is a country’s “basic right” to develop its technology.

"People can tell right and wrong, and justice will have its day,” he said.

Huawei announced Thursday that it would sue the U.S. government over a law that bans executive government agencies from purchasing the company’s hardware.

Read more of Caixin’s coverage of Huawei here


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By Yue Yue and Lin Jinbing / Mar 08, 2019 09:53 AM / Politics & Law

Photo: VCG

Photo: VCG

An investment banker convicted of bribery has brought new meaning to the concept of “hard sell.”

The man, Liu Sijia, did his homework before landing a bond-underwriting deal by persuading a credit ratings agency into giving the bond issuing company a higher credit rating, while promising kickbacks to the issuer’s senior executives.

Liu, an employee in the investment banking division of Great Wall Securities, bribed two senior executives of a local state-owned enterprise (SOE) in 2016 with 3 million yuan ($446,750), according to a court file released Monday. Liu was sentenced to five years for bribery and fined.

In 2015, the state-owned Taizhou Traffic Industry Group in the East China city of Taizhou first planned to use Haitong Securities to underwrite a 2 billion yuan bond offering. But then things began to change.

At the request of Taizhou Traffic Industry Chairman Huang Jinrong, Liu persuaded China Chengxin International Credit Rating into raising the SOE’s credit rating to AA+. Huang changed his mind and decided to have the bond offering underwritten by Great Wall Securities, replacing Haitong.

In 2016, Great Wall Securities earned an underwriting fee of 40 million yuan, double what Haitong would have gotten. After the bond’s issue, Liu gave Huang and Wu Jing, the company’s financial director, 3 million yuan. Huang and Wu have also been sentenced to jail time and fined.

Related: Four Ex-Executives of Scandal-Hit Bad-Asset Bank to Face Bribery Charges

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By Zhang Qi, Ye Zhanqi, Zhao Runhua / Mar 07, 2019 04:35 PM / Politics & Law

Photo: VCG

Photo: VCG

The date for Huawei Chief Financial Officer Meng Wanzhou’s next court appearance regarding her possible extradition has been scheduled to May 8.

According to an email Caixin received from Canada's Department of Justice, the date is not “the date of the start of the extradition hearing, which has not yet been scheduled.”

During a short proceeding Wednesday in British Columbia's Supreme Court, a lawyer for Meng said "serious concerns" have been raised given the case’s “political character,” “motivation,” and “comments by the U.S. president,” according to the South China Morning Post.

The Department said to Caixin that between now and May 8, defense and prosecutors Crown Counsel “will discuss next steps and anticipated for applications in the proceeding.”

On Mar. 1, the Canadian government formally issued “authority to proceed” – an official order to start considering Meng’s extradition-related matter after reviewing the U.S. request that Meng be handed over to face fraud charges.

Read more of Caixin’s coverage of Huawei

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By Zhao Runhua / Mar 07, 2019 11:12 AM / Politics & Law

Chinese telecom giant Huawei is suing the U.S. government over a law that bans the purchase of Huawei equipment, according to a press conference the company held on Thursday.

The company said it would sue to abolish Section 889 in the 2019 National Defense Authorization Act that explicitly bans executive government agencies from purchasing equipment from Huawei and ZTE, another Chinese telecom provider. The bill was signed into law by U.S. President Donald Trump in August 2018.

Huawei’s rotating chairman, Guo Ping, claimed the ban is illegal, adding that limiting Huawei’s role in industry's competition will damage U.S. consumers’ benefits.

In December, Canada arrested Huawei executive Meng Wanzhou on U.S. allegations that she lied to banks to trick them into processing transactions that potentially violated Iran trade sanctions, charges she denies.

Read more of Caixin’s coverage of Huawei

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By Isabelle Li / Mar 05, 2019 07:43 PM / Politics & Law

Photo: VCG

Photo: VCG

China should establish a “national defense system” in cyberspace, according to Zhou Hongyi, a CPPCC member and the founder and CEO of internet security company Qihoo 360.

Advising the CPPCC on Tuesday, the tech tycoon said global cybersecurity risks are becoming increasingly common as AI and the Internet of Things develop. Trillions of devices will be interconnected in the future, and each one could be the target of a cyber-attack, he said.

Zhou cautioned that corporations, network operators and the government itself have been isolated from each other in the fight against cyberattacks, as their defense systems remain separate.

Beijing should initiate the development of a "national-level cybersecurity brain,” Zhou said, which would collect big data related to security with an eye to preventing future attacks.

This is Zhou’s second year speaking on cyber security at the CPPCC. His company, Qihoo 360, provides security services to businesses and governmental institutions.

Related: Big-Data Collection Becomes Big Headache in China


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By Zhao Runhua / Mar 05, 2019 03:12 PM / Politics & Law

Photo: VCG

Photo: VCG

China spends more and more money on its military each year, but this year that growth rate will slow.

The country plans to spend 1.19 trillion ($177.54 billion) on national defense this year, a 7.5% increase compared to last year, according to an official report. In 2018, the country’s national defense budget growth was 8.1%. 

The budget will prioritize national defense and military reforms – new blueprints that are aimed at modernizing the country’s military. Beijing also hopes to improve welfare policies for veterans and increase related subsidies.

China’s 2018 defense budget accounted for roughly 1.3% of GDP, according to government spokesperson Zhang Yesui on Monday, which is still lower than those of some developed countries, many of whom regularly allocate over 2% of GDP to military spending.

“Maintaining a proper increase in the national defense budget is necessary to consolidate the country’s safety and to tailor related changes to our military,” Zhang said.

The growth of China’s national defense budget dipped below 10% in 2016, according to Zhang, who added that China’s “limited” national defense budget will only be used to secure the country’s sovereignty and territorial integrity, and therefore will not be a threat to other countries.

Related: China’s Military Spending Tops 1 Trillion Yuan for First Time

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By Xu Heqian and Tang Ziyi / Mar 04, 2019 06:02 PM / Politics & Law

Photo: VCG

Photo: VCG

China and the U.S. have made "important progress" in trade talks, a spokesperson said Monday, demonstrating Beijing's optimism toward easing trade tensions among the world's two largest economies.

The remarks came after a CNN reporter asked Zhang Yesui, a spokesperson for the annual session of China’s national legislature and a former Chinese ambassador to Washington, how China will respond to a recent consensus by U.S. politicians labeling China a “strategic threat.”

"A China-U.S. relationship characterized by conflict and confrontation is in neither side’s interests,” Zhang said. “In addition, using an old ‘Cold War’ mindset to deal with the new problems of a globalized era is certainly no solution."

Zhang added that this year marks the 40th anniversary of China-U.S. diplomatic relations: "I believe that maintaining stability and development in relations between the two countries has brought enormous benefits to the people on both sides.... Cooperation is the best choice for both sides."

Related: What Would a China-U.S. Trade Deal Look Like?

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By Zhao Runhua / Mar 04, 2019 12:37 PM / Politics & Law

Photo: VCG

Photo: VCG

China should add health warnings to snack packages in order to advise children and their parents about obesity risks, a corporate delegate has proposed to the Chinese People’s Political Consultative Conference (CPPCC), China’s top political advisory body.

An Ting, president of an international art group, proposed the measure, saying that he noticed increasing numbers of obese children in China today compared to when he was a kid.

An proposed that companies be required to include children’s sugar consumption facts and add obesity warnings on snack packages via new laws and industry rules.

An cited a report from Peking University, which says that 28% of China’s children between 7 and 18 will be obese by 2030 if no further action is taken. Meanwhile the U.S., while still home to a higher percentage overall, has seen improvements in its childhood obesity rates ever since it implemented its own measures toward reducing sugar intake.

Related: Study Finds Weight, Vision, Sleep Problems Among China’s Schoolchildren


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By Bloomberg / Feb 28, 2019 09:27 AM / Politics & Law

Photo: VCG

Photo: VCG

Musical.ly, the popular teen video app now known as TikTok, will pay a record $5.7 million to settle claims by the U.S. government that it illegally collected personal information from children.

Musical.ly reached an agreement with the Federal Trade Commission, the agency said Wednesday in a statement, resolving allegations that the social-media company failed to obtain parental consent before collecting names, email addresses and other information from children younger than age 13.

“This record penalty should be a reminder to all online services and websites that target children,” FTC Chairman Joe Simons said. “We will not tolerate companies that flagrantly ignore the law.”

The Children’s Online Privacy Protection Act, signed into law more than two decades ago, limits how websites and online services -- including apps -- can collect, use and disclose information from kids. Additionally, the FTC said Musical.ly accounts were public by default, meaning that a child’s profile biography, username, picture and videos could be seen by other users.

TikTok is now making changes to better accommodate younger users in the U.S. based on guidance from the FTC, the company said in a statement. Beginning Wednesday, users will be directed to age-appropriate environments. The app for younger users won’t permit the sharing of personal information, and will also have “extensive” limitations on content and user interaction.

“We care deeply about the safety and privacy of our users,” TikTok said. “This is an ongoing commitment, and we are continuing to expand and evolve our protective measures in support of this.”

Musical.ly was acquired by the world’s most valuable startup, Beijing ByteDance Technology Co., for $800 million and soon after was merged with its TikTok app. A hit in the U.S., Musical.ly was seen as a way for the Chinese company to expand abroad, and also to capitalize on an increasing appetite for short video.

“This FTC ruling underscores what we have long known: companies do not consider children’s personal information out of bounds,” U.S. Senator Ed Markey, who helped author COPPA, said in a statement. “While this fine may be an historic high for a COPPA violation, it is not high enough for the harm that is done to children and to deter violations of the law in the future by other companies.”

The settlement also requires the app’s operators to take offline all videos made by children younger than 13, the FTC said.

Facebook Inc. is also facing a COPPA-related complaint from several consumer groups. The groups claim the social media giant knew that many of the games it offered were popular with children under 13 and were being played by some potentially as young as 5 years old. Facebook said Feb. 20 that it wasn’t in contact with the FTC over the issue.

Related: WeChat ‘Blocks’ TikTok — Again

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