(Yicai Global) July 12 -- The blocking of the mega merger between gaming livestreaming giants Huya and Douyu, on the grounds that the move would give backer Tencent Holdings too much control over the new entity, is the first instance of its kind in China’s internet platform economy and demonstrates regulators’ determination to rein in monopolistic behaviors, according to a government advisor.

This is a clear signal that the Chinese government is stepping up anti-trust regulation and preventing disorderly expansion in the field of the platform economy, Zhang Chenyin, a member of the State Council’s Anti-Trust Committee advisory team, wrote in the Economic Daily on July 10.

China’s State Administration for Market Regulation vetoed the proposed merger on July 10, stating that it would further enhance Tencent’s dominance in the gaming livestreaming market. It is therefore harmful to fair market competition, may damage the interests of consumers and is not conducive to the standardized, healthy and sustainable development of the online gaming market, it added.

The case will encourage internet-based companies to increase their market share through fair means, such as technological innovation and improving consumer welfare, said Zhang, who is also director of the Center for Competition Law Studies at Tsinghua University's School of Law. It will also spur such firms to re-evaluate their business practices, she added.

Huya and Douyu announced they were to merge last October. According to the deal, Douyu would become a unit of Guangzhou-based Huya and would delist from the Nasdaq. The new entity would hold around 80 percent of China’s e-sports market and Tencent, which solely owns Huya and is joint controller of Wuhan-based Douyu, would have 68 percent voting rights.

Tencent will abide by the decision, actively cooperate with regulatory requirements and operate in compliance with the laws, the Shenzhen-based firm responded the same day.

Editors: Xu Wei, Kim Taylor