The US Department of Justice on Wednesday released a statement confirming that two Tencent-appointed directors have resigned from Epic Games’ board. The announcement came after concerns were raised by the Antitrust Division that the directors’ dual roles on both the Epic and Tencent boards violated Section 8 of the Clayton Act, which stipulates that an individual cannot serve on the boards of multiple competing companies.
Why it matters: Although the Department of Justice’s statement made no mention of national security concerns, the case has thrown a spotlight on interdependencies between Chinese and US gaming companies — relationships that could be affected by the delicate nature of China-US political relations.
- Epic’s Unreal Engine is a powerful game development platform created by Epic Games, widely used in the gaming industry. The increasing adoption of the Unreal Engine by Chinese gaming companies, especially for major projects with significant investments and long development cycles, makes the stability of technical support from Epic Games crucial for Chinese developers.
Details: Tencent holds a minority stake in Epic, and the conflict arose because Tencent is also the parent company of Riot Games, an Epic competitor. In response, Tencent has decided to amend its shareholder agreement with Epic, giving up its unilateral right to appoint directors or observers to Epic’s board in the future, according to the statement.
- The US Department of Justice said that Riot Games, wholly owned by Tencent, and Epic Games, in which Tencent holds approximately a 29% stake in fully diluted shares, are in a competitive relationship. Therefore, directors cannot serve on the boards of both companies at the same time.
- The two directors involved in this incident are David Wallerstein and Ben Feder. Wallerstein played a key role in securing early investments in Tencent by South Africa’s MIH and served as a Senior Vice President at Tencent for many years before becoming a Senior Management Advisor in 2024. Feder, the former President of International Partnerships at Tencent North America, is now a managing partner at Tirta Ventures.
- “Scrutiny around interlocking directorates continues to be an enforcement priority for the Antitrust Division,” said Deputy Director of Civil Enforcement Miriam R. Vishio of the Justice Department’s Antitrust Division, in the statement.
Context: Currently, China does not have an independent game development engine to rival Epic’s Unreal or the other leading engines in the sector.
- Major game development engines include Unreal Engine (Epic Games, US), Unity Engine (Unity Technologies, US), CryEngine (Crytek, Germany), Source Engine (Valve, US), Godot Engine (Community, Argentina), RPG Maker (Kadokawa, Japan), and GameMaker Studio (YoYo Games, UK; now a subsidiary of Tencent).
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