Chinese game streaming platforms Huya and Douyu announced on Monday that they would terminate a merger agreement after antitrust regulators blocked the deal on Saturday. The decision dealt a new blow to Tencent, leader of the merger.

Why it matters: This is the first time Chinese regulators have blocked a merger in the tech sector for antitrust reasons. In other recent cases, Chinese regulators have fined companies retroactively up to RMB 500,000 (around $77,318) over unreported merger and acquisition deals. However, companies have been able to keep these closed deals. 

Details: Huya and Douyu announced Monday they would terminate the merger agreement. Both companies said they “fully respect” and would “abide by” the decision made by the Chinese State Administration of Market Regulation (SAMR). 

  • SAMR said the Huya-Douyu merger would “further strengthen Tencent’s dominance in the game streaming market” and empower the company to “restrict and exclude competition,” in a Saturday statement (in Chinese). 
  • Tencent, a social media giant and the largest video game company in China, owns a 37% stake in Huya and 38% in Douyu.
  • Huya and Douyu account for the majority of China’s game streaming market. Huya has 40% market share and Douyu 30%, said the SAMR statement. “If Huya and Douyu merge, Tencent will solely control the merged entity,” it added.
  • SAMR rejected a Tencent proposal to add restrictive conditions to the merger deal, saying the plan “cannot effectively address the competition concerns mentioned above.”
  • Tencent said in a Sunday statement that it would “abide by the decision, comply with regulatory requirements, and fulfill its social responsibilities.”

Context: Tencent, Huya, and Douyu announced the merger plans in August 2020, and filed for antitrust review in November.

  • Chinese antitrust regulators started to tighten the scrutiny on tech companies’ merger and acquisition deals last November. It fined a batch of companies, including Tencent and Alibaba, RMB 500,000 for failing to report M&A deals. 
  • Anti-Monopoly Law in China requires companies to report investment or merger and acquisition deals that could create a single company that holds more than half of its relevant market.

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Writing about semiconductors and telecommunications.