The Chinese government had never said no to a merger deal in the country’s technology sector until two weeks ago when the State Administration for Market Regulation blocked Tencent Holdings’ plan to merge Douyu and Huya, two video game livestreaming websites it controls.
“This is the first case involving Internet platforms, a sector where antitrust authorities have long been very careful when it comes to making decisions relating to what would constitute a ‘concentration of business operators’,” said Laura Wei, lawyer at W&H Law Firm. “In this case, the antitrust authorities have made a comprehensive assessment of how the merger is likely to have an extremely adverse impact on competition.
Henry Gao, a trade law professor at Singapore Management University, expects more mergers to be halted on similar antitrust grounds in future as China’s antitrust regulator meets instructions from the country’s leadership to “prevent the disorderly expansion of capital”. Huya and Douyu were once bitter rivals, filing a series of expensive lawsuits against each other as they went head to head over the past decade. Tencent, an early investor in both companies, had the opportunity to take over both platforms should it choose to. Last April, Tencent exercised an option to gain control of Huya after earlier seizing control of Douyu.
Also in 2015, ride-hailing firms Didi Dache and Kuaidi Dache merged to create Didi Chuxing, with a valuation then estimated at roughly US$6bil . Didi later took over Uber’s China operation in another headline-grabbing deal, which catapulted the company’s valuation to US$35bil the following year. The market capitalisation of Didi, which recently listed in the US, now sits above US$60bil .