Photo:VCG

China’s State Administration for Market Regulation on Saturday barred the merger between two livestreaming firms Huya and DouYu, after an antimonopoly review. 

Chinese tech giant Tencent, which raised the merger case, responded that it will abide by the review decision, and actively cooperate with regulatory requirements, and operate in accordance with the law.

As the first merger prohibition case over business concentration in the platform economy, it shows Chinese authorities have moved up regulations to stop monopolistic behaviors that stifle market competition, experts said.

Tencent has separate control of Huya and joint control of DouYu, ranking first and maintaining over 40 percent of the online games market. Huya and DouYu separately have 40 percent and 30 percent share of the game livestreaming market, ranking first and second, according to Xinhua News Agency.

A merger between Huya and DouYu would give Tencent sole control of the merged entity, further strengthening Tencent's dominance in the game livestreaming market. Industrial insiders estimated that the new merged platform, if materialized, would have a market share as high as 80 percent.

Alongside the fast development of internet-based business in China, online platforms have thrived and expanded rapidly. Over the past few years, the pattern of businesses expanding rapidly was through injecting massive capital and through business  consolidation, Ma Jihua, a senior tech industry analyst based in Beijing, told the Global Times on Saturday.

There are plenty of such cases, such as the merger of ride-hailing platform Didi with rivals Kuaidi and Uber China, and the merger of food delivery platform Meituan with consumer review platform Dianping, said Ma.

Chinese authorities used to adopt a relatively low-key approach over antimonopoly regulation and offered a loose environment for firms to grow. The Tencent case signals a changing trend of authorities moving up regulations to stop monopolistic behaviors, Ma noted.

One of the key tasks explicitly mentioned in the annual Central Economic Work Conference last December is to “strengthen antimonopoly supervision and prevent the disorderly expansion of capital.” 

Li Sanxi, director of Renmin University of China’s Digital Economy Research Center, told the Global Times that the merger rejection, on one hand, reflects regulatory authorities’ stepping up efforts to strengthen antimonopoly.On the other hand, the rejection sends a strong warning to internet titans to change their previous strategy of disorderly capital expansion.

In recent years, China's antimonopoly legislation and law enforcement have made great progress, which has facilitated a healthy development of the platform economy.

Since late last year, internet giants Alibaba, Didi Chuxing,  Meituan and others have been placed on file, investigated and punished by regulators. Alibaba was fined 18.228 billion yuan ($2.8 billion) by the market regulator for abusing its dominant market position.

Global Times