China`s market regulator has finally decided that it would block Tencent Holdings Ltd`s plan to merge the country’s top two video game streaming sites, Huya and DouYu, on antitrust grounds.

In 2020, Tencent first announced plans to merge Huya and DouYu in a tie-up which was made to streamline its stakes in the firms, which were estimated by data firm MobTech to have an 80% slice of a market worth more than $3 billion and growing fast.

Tencent, which is Huya`s biggest shareholder comes with 36.9% of stake and also owns more than a third of DouYu, with both firms listed in the United States, and worth a combined $5.3 billion in market value.

The State Administration of Market Regulation (SAMR) planned to seal the deal which came after the regulator reviewed additional concessions proposed by Tencent for the merger.

SAMR further revealed that Huya and DouYu`s combined market share in the video game live streaming industry would be more than 70% and their merger would establish Tencent`s dominance in this market, given Tencent already has over 40% market share in the online games operations segment.

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

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.”

This development comes at times of an ongoing crackdown on Chinese tech companies by the government. Even in 2020, the anti-monopoly regulator fined a whopping $2.75 billion on e-commerce giant Alibaba for engaging in anti-competitive behaviour.

SAMR published a memo concurrently along with the announcement and Zhang Chenying, a member of the state council’s antitrust committee, argued the deal would prevent fair competition.

“If Huya and DouYu are to merge, the original joint control of Douyu will become Tencent`s complete control of a merged entity,” Zhang wrote.

“Considering factors such as revenue, active users, live streaming resources and other key indices, we can expect that a merger would eliminate or restrict fair competition.”