Anti-monopoly moves stimulate innovation

The State Administration for Market Regulation announced it had prohibited the merger of the Tencent-backed game streaming platforms Douyu and Huya on Saturday because the merger would eliminate competition.

This is the first time the market regulator has prohibited a merger in the internet industry since the Anti-Trust Law came into effect more than 10 years ago.

In April, the market regulator ticketed Alibaba for abusing market dominance, fining it 18.23 billion yuan ($2.81 billion), 4 percent of its sales revenue in 2019. That was a type of post-punishment as it came after the deal had been done. The Tencent merger ban is more like a case of early intervention.

The two benchmark cases involving the country’s largest two IT companies indicate that the post-punishment and early intervention will become two main forms of the anti-monopoly measures in the future, even if the early intervention is comparatively rare in antitrust law enforcement.

Early intervention is conducive to preventing negative market effects and damage to the reputations of the enterprises. That requires the watchdog to make its supervision more efficient and preemptive. The enrichment of their anti-trust toolkit means they can suit the remedy to the case while exercising their power.

One of the fundamental purposes of the anti-trust probes are to ensure a healthy order in the internet market. The other internet companies should draw lessons from the two cases and know the boundaries of their business, investment and development. China does not allow monopolies and the unlimited sprawl of capital.

Another purpose of the anti-trust moves is to encourage market competition and boost innovation, particularly from the startups and newcomers in case the monopoly companies will take advantage of their dominance to kill all emerging competitors. An institutional environment for healthy market competition serves the interests of all parties, including the big companies.