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Tencent’s $5.3 Billion Deal To Merge Huya and DouYu Blocked by China’s Antitrust Regulator

Tencent Holdings Ltd had plans of merging China’s video game streaming sites, Huya and DouYu, but that won’t be possible. China’s market regulator has blocked Tencent’s deal on grounds of antitrust.

The merger of Huya and DouYu was announced last year in a tie-up that would streamline Tencent’s stakes in the firms, which have an 80 percent slice of the market according to the data from MobTech firm.

Tencent owns about 36.9 percent share of Huya, and one-third of DouYu’s shares. Both the firms are listed in the United States and combinedly valued at $5.3 billion.

From the report by Reuters, the SAMR (State Administration of Market Regulation) planned to block the deal after the regulator reviewed the additional concessions proposed by Tencent for the merger. According to SAMR, Tencent already owns a 40 percent share of the online games market segment and the merger would further strengthen Tencent’s dominance in the market given that Huya and DouYu together have over 70 percent share in the video game streaming industry.

Huya and DouYu are among the top video game streaming sites in China, and a huge mass of people go to the sites to watch e-sports tournaments and see their favorite professional gamers perform.

According to a statement from Tencent, the firm will abide by the decision, comply with all regulatory requirements, operate in accordance with applicable laws and regulations, and fulfill its social responsibilities. The move from SAMR comes at a time when there’s an ongoing crackdown on the Chinese tech firms from the government. The regulatory body had, earlier this year, ordered a fine of $2.75 billion on Alibaba on the grounds of engaging in anti-competitive behavior.

Moreover, SAMR published a memo in which Zhang Chenying, a member of the state council’s anti-trust committee, says that the merger deal will give way to unfair competition. He wrote, “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.” The two firms, however, have given no comments on the decision by SAMR.

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