China's Regulatory Authorities Conditionally Approve Tencent's Acquisition of Ximalaya

On May 12th, the State Administration for Market Regulation of China announced its conditional approval of Tencent Holdings' acquisition of Ximalaya equity, with additional restrictive conditions.

The regulatory authorities believe that this acquisition may have an exclusionary and restrictive effect on the competition in the domestic online audio playback platform market and the online music playback platform market in China. Therefore, the parties to the transaction are required to make five specific commitments.

The five commitments cover pricing, content, copyrights, and channels

According to the announcement, Tencent, Ximalaya, and the entity after concentration must commit to: not raising the service prices of online audio playback platforms, lowering service levels, or attaching unreasonable transaction conditions; not reducing the proportion of free content and free popular content; not reaching exclusive authorization agreements with copyright holders, and must terminate existing exclusive authorization agreements within the specified time limit; not bundling audio or music platform products with car manufacturers, or hindering their purchase of competitors' products; not restricting streamers from registering on multiple platforms or distributing their copyrighted works.

The regulatory authorities believe that the above commitment plan can effectively reduce competition issues caused by this concentration, and can protect the legitimate rights and interests of consumers, copyright holders, streamers, car manufacturers, and other parties.

Preventing "involution" competition is a regulatory focus

The State Administration for Market Regulation of China emphasized in the announcement multiple times that it will prevent "involution" competition in the platform sector, and stated that it will strictly supervise the parties to the transaction to fulfill restrictive commitments, and promote a win-win development of platform enterprises with operators and workers inside the platform.

Tencent owns major music platforms such as NetEase Cloud Music and QQ Music, while Ximalaya is one of the largest online audio platforms in China. The synergy in content copyrights and user scale after their merger is the core concern of this regulatory review.