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

China’s market regulator on Saturday said it “would block Tencent Holdings’ plan to merge the country’s top two videogame streaming sites, Huya and DouYu, on antitrust grounds”.

The first time that this decision was taken in a tie-up designed to streamline its stakes in the firms, which were estimated by data firm MobTech to have an 80% slice of a market worth more than $3 billion and growing fast.

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

Huya and DouYu are ranked No. 1 and No. 2, respectively, as China’s most popular video game streaming sites, where users flock to watch e-sports tournaments and follow professional gamers.

Tencent is Huya’s biggest shareholder with 36.9% and also owns over a third of DouYu, with both firms listed in the United States, and worth a combined $5.3 billion in market value.

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

“If Huya and DouYu are to merge, the original joint control of Douyu will become Tencent’s complete control of a merged entity,” Zhang wrote.

“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.”

Huya and DouYu did not immediately respond to requests for comment on the SAMR decision. In a memo from SAMR published concurrently with the announcement, Zhang Chenying, a member of the state council’s anti-trust committee, argued the deal would prevent fair competition.

So this is creating a lot of problems for the companies and how they overcome them is yet to be seen.