China's market regulator has conditionally approved Tencent's acquisition of online audio platform Ximalaya, imposing a series of antitrust restrictions aimed at preserving competition in the country's fast-growing digital audio market.

The State Administration for Market Regulation said on May 12 that the transaction could have the effect of restricting competition in China's online audio and music streaming sectors, prompting regulators to approve the deal with conditions.

Under the ruling, Tencent, Ximalaya and the merged entity must not raise service prices, reduce service quality or impose unreasonable transaction conditions on users. They are also barred from reducing the share of free or popular free content on the platform.

The regulator further prohibited the companies from signing exclusive licensing agreements with copyright holders for online audio content, and ordered them to terminate existing exclusive arrangements within a specified period.

The conditions also target China's growing in-car entertainment market. Tencent and Ximalaya are banned from bundling online audio or music streaming services with automakers in ways that could limit rivals' access, or from restricting carmakers from purchasing competing products.

The companies are also prohibited from stopping creators and streamers from distributing their copyrighted works across multiple platforms.

The regulator said the commitments would help protect consumers, copyright owners, creators and automakers, while preventing what Chinese authorities describe as "involution-style" competition among internet platforms.

The approval comes nearly a year after Tencent Music Entertainment announced plans to acquire Ximalaya, one of China's largest podcasting and audiobook platforms, in a deal that would further consolidate Tencent’s dominance in the country’s digital audio market.

Tencent Music already operates some of China's largest music streaming services, including QQ Music, Kugou Music and Kuwo Music.