Tencent given conditional approval for Ximalaya acquisition

China's market regulator has conditionally approved Tencent's acquisition of podcasting and audio platform Ximalaya, imposing a series of restrictions aimed at curbing anti-competitive behavior in China's rapidly expanding online audio and music streaming markets.

The State Administration for Market Regulation said on Tuesday that the deal could otherwise have the effect of "excluding or restricting competition" in China's online audio playback and online music streaming sectors, prompting authorities to attach five behavioral conditions to the approval.

The approval marks one of the most closely watched antitrust reviews involving China's platform economy this year.

Under the conditions, Tencent, Ximalaya and the merged entity will be barred from raising service prices, lowering service quality, or imposing unreasonable trading conditions on users of online audio platforms, SAMR said.

The regulator also ordered the companies not to reduce the proportion of free or popular free audio content available on the platform.

In a move likely to reverberate across China's digital copyright industry, SAMR said the companies would be prohibited from entering into exclusive licensing agreements with copyright holders for online audio content, and must terminate existing exclusive licensing arrangements within a specified time frame.

The regulator further prohibited the merged company from bundling online audio or music streaming services with automobile manufacturers, or restricting carmakers from purchasing rival products.

The companies were also barred from preventing content creators and hosts from distributing copyrighted works across multiple platforms.

SAMR said the conditions would help protect consumers, copyright owners, content creators and automakers, while maintaining fair competition in the sector.

Tencent has steadily expanded its footprint across China's digital entertainment ecosystem through music, gaming, video and literature platforms. Ximalaya, often described as China's answer to Audible, is one of the country's largest online audio platforms, offering podcasts, audiobooks and radio-style content.

SAMR said it would closely supervise the implementation of the commitments and use merger reviews to prevent anti-competitive behavior before it emerges, while promoting the "healthy development" of China's platform economy.