Market supervisors in the southern Chinese city of Shenzhen held a closed-door hearing about QVOD's alleged copyright infringement on Tuesday, Xinhua News Agency reports.
Shenzhen-based QVOD Technology is one of China's most popular video sites.
Zeng Yaodong, an official from Shenzhen's market supervision administration, said the 260-million-yuan (42-million-U.S.-dollar) penalty that is expected to be levied against QVOD is based on the company's profits gained from copyright infringement and its reluctance to reflect upon its wrongdoings.
Zeng explained that the penalty is three times the business turnover of QVOD, which is 86.7 million yuan (13.8 million US dollars). The punishment came as the company continued to deliberately infringe upon other's online information dissemination rights, despite authorities' previous penalties and warnings.
The National Copyright Administration had previously fined QVOD 250,000 yuan (41,225 US dollars) for similar actions.
Shenzhen authorities will make the final decision over the penalty, based on the outcome of the hearing.