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Beijing bans merger of Tencent gaming outfits Huya and DouYu, to prevent a monopoly

Want to know what did get approval? Tencent’s bring-it-home acquisition of search engine Sogou

Chinese regulators have refused to approve the merger of two Chinese game streaming services, citing the potential for creating a monopoly in the industry for the part-owner of both companies — tech giant Tencent.

According to a State Administration of Market Supervision (SAMR) statement released Saturday, the Chinese antitrust watchdog conducted a review of the planned merger of Huya Company and DouYu International and decided it shouldn't happen.

Tencent currently holds sole control over Huya and joint control over DouYu. DouYu and Huya jointly control more than 70 per cent of of China’s gaming market.

SAMR fears that a merger would give Tencent a dominant position in the game-streaming market, leaving the web giant in a position to exercise closed-loop management of upstream and downstream markets.

SAMR said the organization rejected a Tencent proposal to add restrictive conditions to the merger deal because it didn’t effectively address antitrust concerns.

Huya and DouYu did what Chinese businesses do when the government complicates their lives: offer thanks and move on. Statements from Huya and DouYu state the companies “fully respect and will abide by the SAMR decision”.

Although Chinese regulators have been quite active lately blocking overseas IPOs, banning apps over data security concerns, and fining tech companies for not offering enough transparency in their mergers and acquisitions, this is the first time Beijing has blocked a merger of tech companies to prevent a monopoly.

SAMR threw Tencent a bone on Tuesday, unleashing the tech giant to buy out Sogou Inc., China’s third most popular search engine, for US$3.5 billion.

The deal effectively rehomes Sogou to China, as it is listed on the New York Stock Exchange. Beijing has cooled on its tech giants listing offshore, on grounds that it could see user data cross borders. ®

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