China’s market regulator said on Saturday that Tencent Holdings Ltd’s plan to integrate the country’s top two videogame streaming sites, Huya and DouYu, will be blocked on antitrust grounds.
Tencent first revealed plans to merge Huya and DouYu last year in a tie-up meant to consolidate its shares in the firms, which were estimated by analytics firm MobTech to have an 80% share of a market worth more than $3 billion and growing quickly.
Tencent controls 36.9 percent of Huya and more than a third of DouYu, both of which are listed in the United States and have a combined market value of $5.3 billion.
On Monday, Reuters reported that the State Administration of Market Regulation (SAMR) planned to deny the acquisition after reviewing more concessions provided by Tencent for the merger.
According to SAMR, Huya and DouYu will have a combined market share of more over 70% in the video game live streaming business, and their merger will reinforce Tencent’s dominance in this market, considering that Tencent already has a 40% market share in the online games operations area.
Huya and DouYu are the top two most popular video game streaming sites in China, with fans flocking to watch e-sports tournaments and follow professional gamers.
In a statement, Tencent stated that it “will abide by the ruling, comply with all regulatory requirements, operate in compliance with applicable laws and regulations, and fulfill our social responsibilities.”
The deal’s cancellation comes amid the government’s escalating assault on Chinese technology businesses. Earlier this year, the anti-monopoly agency imposed a record $2.75 billion fine on Alibaba for anti-competitive activities.
Huya and DouYu did not respond to calls for comment on the SAMR ruling right away.
Zhang Chenying, a member of the state council’s anti-trust committee, said in a memo issued concurrently with the announcement that the deal would inhibit fair competition.
“If Huya and DouYu merge,” Zhang said, “the original shared ownership of Douyu will become Tencent’s entire control of a merged entity.”
“We can expect a merger to limit or restrict fair competition based on metrics such as revenue, active users, livestreaming resources, and other critical indices.” (Kane Wu in Hong Kong, Josh Horwitz in Shanghai, and Cheng Leng in Beijing contributed reporting, and Lincoln Feast edited the piece.)