On Saturday, China’s market regulator, the State Administration of Market Regulation (SAMR) announced that it would block Tencent Holding’s plans to merge Huya and DouYu, in a $5.3 billion merger. These companies are the top two video games streaming sites in the country. On Monday, Reuters was the first to report the SAMR’s plan to block the merger after it had reviewed the extra concessions that Tencent had proposed to facilitate the deal.
SAMR said that the merger between the two video game companies would give Tencent a combined market share of above 70 percent and therefore it was blocking the deal. Tencent already has a share of above 40 percent in the video games market and this proposed deal would strengthen its dominant position. So, the deal has been blocked.
The SAMR also published a memo along with the announcement. Zhang Chenying, a member of the anti-trust committee said that if Huya and DouYu were to merge, the original joint control of DouYu would become Tencent’s complete control of a merged entity.
He added that if they considered factors including revenue, active users, live streaming resources and other important factors, the proposed merger could restrict or eliminate fair competition.
In a statement Tencent said that it would abide by the decision and comply with all regulatory requirements. The tech company also said that it would operate according to the rules and laws that are applied in the country and would fulfill their social responsibility.
The SAMR has been bringing Chinese tech companies in line with the country’s policies as they keep growing bigger and bigger and spread operations far and wide. Early this year, the agency had fined Alibaba $2.75 billion for anti-competitive behavior. Tencent Holdings and Alibaba are two giant Chinese Corporations that have been expanding their presence across the country.
Huya is the top ranked video game in China while DouYu ranks a close second. These games that are streamed by users, allow them to watch e-sports tournaments. They can also follow professional gamers. When CNBC contacted both the video games streamers for comment there was no response from them.