Chinese Antitrust Regulator Blocks Tencent’s $5.3b Video Games Merger

On Saturday, Chinese market regulator – State Administration of Market Regulation (SAMR), announced that it would stop Tencent Holdings Ltd‘s plans of merging Huya and DouYu; the country’s biggest video game streaming services. The Chinese regulator said this action was based on antitrust issues.

Big tech companies in China have been facing regulatory actions from Chinese authorities with the most recent of these chain of events being the crackdown against Didi Global Inc.

The plan to merge Huya and DouYu is not entirely new as Tencent has announced this since last year. The company plans on merging the aforementioned streaming services to streamline its stakes in the firms. Both companies are listed in the United States and together are worth more than $5.3 billion in market value.

According to data firm MobTech, Tencent is estimated to have an 80% slice of a market worth more than $3 billion and growing fast. With 36.9 percent, Tencent is Huya’s biggest shareholder. The multinational technology company also owns more than one-third of DouYu.

The plan to block the merger was first reported on Monday after the State Administration of Market Regulation (SAMR) reviewed additional concessions proposed by Tencent Holdings Ltd for the merger.

According to the State Administration of Market Regulation (SAMR), Huya and DouYu’s combined market share in the video game live streaming sector would surpass 70%, and merging them into one firm would only consolidate Tencent’s dominance in this market as it already has over 40% market share in the online games operations segment.

According to Zhang Chenying, a member of the state council’s anti-trust committee, “If Huya and DouYu are to merge, the original joint control of Douyu will become Tencent’s complete control of a merged entity. Considering factors such as revenue, active users, live streaming resources and other key indices, we can expect that a merger would eliminate or restrict fair competition”.

While Huya did not immediately respond to a request for comment, DouYu showed a rather positive response to the regulator’s decision. The company said that it “fully respects the regulatory decision and actively cooperates with regulatory requirements to operate in compliance with applicable laws and regulations”.

“We will abide by the decision, comply with all regulatory requirements, operate in accordance with applicable laws and regulations, and fulfill our social responsibilities”, Tencent said regarding the development.

Huya and DouYu, remain the most popular video game streaming platforms in China and a merger between them would have been the biggest thing to happen in the Chinese tech space.