CHINA’S market regulator Saturday said it would block Tencent Holdings Ltd.’s plan to merge the country’s top two video game streaming sites, Huya Inc. and DouYu International Holdings Ltd., on antitrust grounds.

Tencent first announced plans to merge Huya and DouYu last year in a tie-up designed to streamline its stakes in the firms, which were estimated by data firm MobTech to have an 80 percent slice of a market worth more than US$3 billion and growing fast.

The deal wasn’t approved because it would strengthen Tencent’s dominance in China’s game streaming market, giving it an anti-competitive edge, the State Administration for Market Regulation (SAMR) said in a statement.

Tencent is Huya’s biggest shareholder with 36.9 percent and also owns over a third of DouYu, with both firms listed in the United States, and worth a combined US$5.3 billion in market value.

Huya and DouYu are ranked No. 1 and No. 2, respectively, as China’s most popular video game streaming sites, where users flock to watch e-sports tournaments and follow professional gamers.

The SAMR said Huya and DouYu’s combined market share in the video game live streaming industry would be over 70 percent and their merger would strengthen Tencent’s dominance in this market, given Tencent already has over 40 percent market share in the online games operations segment.

“From the perspective of different key indicators like revenue, number of active users, resources for streamers, the total share is very substantial and the elimination and restriction of competition can be foreseen,” the SAMR said in a statement.

Guangzhou-based Huya offered to buy its domestic competitor in October, proposing an all-stock transaction that would have created a combined business valued at about US$11 billion at the time. Tencent would have had about 68 percent of the merged business’ voting shares.

Consolidation would likely have improved the profitability of the business: the streaming networks live or die by the popularity of star players and the virtual tips and gifts that fans buy for them, leading to intense bidding wars for the most-recognized names.

Tencent said in a statement it “will abide by the decision, comply with all regulatory requirements, operate in accordance with applicable laws and regulations, and fulfill our social responsibilities.”(SD-Agencies)