Tencent Holdings Ltd’s plan to merge two of the leading gaming streaming sites has been blocked by the Chinese market regulator. The merger of Huya and DouYu was blocked on the grounds of Antitrust.
The plan by Tencent to merge the two companies was formulated in 2021 for aligning Tencent’s stakes in the two firms. According to MobTech, a data firm based in the country, the stake of Tencent in the gaming sector accounts for 80% of the entire market, worth over $3 billion. The gaming market in China is also rapidly growing.
Tencent owns the largest stake in Huya, with its shares accounting for 36.9% of the entire company. The firm also owns a third of DouYu. Huya and DouYu are two firms listed in the United States, and they both have a total market value of $5.3 billion.
The State Administration of Market Regulation (SAMR) made a plan to block the Tencent deal after a review of additional concessions.
According to SAMR, Huya and DouYu hold over 70% of the market share in the video game industry. If this merger went through, it would increase the dominance of Tencent in the gaming market, given that the firm currently holds more than 40% of the market share in online games. In China, Huya and DouYu are the largest video game streaming sites.
SAMR also published a memo together with the announcement stating that the merger would jeopardize a fair, competitive environment. According to Zhang Chenying, a member of the anti-trust committee for the State Council, “If Huya and DouYu are to merge, the original joint control of DouYu will become Tencent’s complete control of a merged entity.”
Zhang also added that “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.”
Chinese Crackdown on Tech Firms
The halt in Tencent’s deal comes amidst a crackdown on Chinese tech firms. In early 2021, the Chinese anti-monopoly regulator slapped Alibaba with a $2.75 billion fine for engaging in behaviours contrary to the country’s competition laws.
DouYu responded to the decision by the regulator, stating that it “fully respects the regulatory decision and actively cooperates with regulatory requirements to operate in compliance with applicable laws and regulations.” On the other hand, Huya did not give an official response or statement.
Speaking on the matter, Tencent stated that it “will abide by the decision, comply with all regulatory requirements, operate in accordance with applicable laws and regulations, and fulfil our social responsibilities.”