Huya douyu Photo:VCG

The halt of the merger between two Chinese game-streaming platforms ordered by market regulator showed that Chinese authorities have stepped up regulation, in a more scientific manner, to stop monopolistic behaviors that stifle market competition, industry observers and antitrust experts said. They urged the country's big technology companies to abandon the strategy of disorderly expansion using capital.

The antitrust bureau under China's State Administration for Market Regulation (SAMR) on Saturday stopped the merger between two of the largest game-streaming firms in China, both backed by Chinese internet giant Tencent - Huya and Douyu - after an antimonopoly investigation that began in January. 

In a statement published on the bureau's website, it said a merger between Huya and Douyu would strengthen Tencent's "dominant position" in the Chinese game-streaming market, and an effect of elimination and restriction of competition could be foreseen.

In the domestic game-streaming market, Huya and Douyu combined had more than 80 percent of active users, more than 60 percent of popular game streamers, and over 70 percent of the total market in terms of turnover, according to the statement. 

"Before the merger, Tencent already had sole control of Huya and joint control of Douyu, but competition between Huya and Douyu remained. Such a merger would eliminate the competition thoroughly and further strengthen its dominant market position," said the bureau. 

Industry insiders estimated that the new merged platform, if it materialized, would have a market share as high as 80 percent.

Tencent, which proposed the merger, responded on Saturday that it will abide by the decision, actively cooperate with regulatory requirements, and operate in accordance with the law.

As the first banned merger over market concentration concerns in China's platform economy, it on one hand reflects Chinese regulatory authorities' stepped-up efforts to strengthen antimonopoly efforts. On the other hand, it sends a strong warning to internet titans to change their strategy of disorderly expansion using a large amount of capital, Li Sanxi, director of Renmin University of China's Digital Economy Research Center, told the Global Times. 

One of the key tasks explicitly mentioned in China's annual Government Work Report is to "strengthen antimonopoly efforts and contain disorderly expansion of capital." 

Chinese authorities have strengthened their supervision of some of the largest technology firms due to mounting concerns about their monopolistic positions and fast growth.  

Food delivery platform Meituan is facing an antitrust probe, following a record fine of 18.228 billion yuan ($2.8 billion) on e-commerce giant Alibaba for abusing its dominant market position.

Complaints about market "squeezes" by community group-buying platforms on brick-and-mortar supermarkets and grocery stores have also aroused discussion on China's Twitter-like Weibo in recent days. In March, market regulators fined five community group-buying platforms due to their unfair price competition practices.

Chinese authorities used to take a relatively low-key approach to antimonopoly regulation and offer a lightly restricted environment for firms to grow, but the Tencent case signals a shifting trend of authorities using regulations to stop monopolistic behavior, Ma Jihua, a senior tech industry analyst based in Beijing, told the Global Times.

"In this case, we could see the deep understanding and useful exploration by Chinese law enforcement agencies on safeguarding the market competition order of the digital economy. In accordance with the existing legal framework, they are improving the regulations in a more scientific way," Zhong Chun, secretary-general of the antitrust and anti-unfair competition law research association under the Guangdong Province Law Society, told the Global Times on Sunday. 

Zhong suggested internet companies should always adopt an antitrust mentality, undertake self-examination strictly, and be proactive in correcting their mistakes. 

"Internet companies should not abuse their market advantages. The competitive advantages obtained by internet companies through their efforts should be protected by law, but the scope of protection is not boundless," Zhong said. 

"Especially in the field of the digital economy, some internet companies have abused their cumulative competitive advantages, such as capital and data, to unreasonably eliminate and restrict competition. Such behavior will inevitably attract strict scrutiny of the law."