The Politicization of National Anti-Monopoly Laws A Theoretical Discussion About Economic Policy in an Age of Rising Protectionism

Various Anti-Monopoly Laws Governing M&A Transactions United States – The Clayton Act; Hart-Scott-Rodino Act; Dept. of Justice Guidelines The EU – Merger Regulation 139/2004 (ECMR) China – 中华人民共和国反垄断法 or Anti-Monopoly Law of the PRC These three laws require government approval before a merger can be completed

China’s Anti-Monopoly Law ( 中华人民共和国反垄断法 ) Adopted in Aug. 2007, went into effect Aug Notification of transaction required when: –Global combined company sales >RMB10 billion and China sales of each company > RMB400 million; or –combined company PRC sales > RMB2 billion and China sales of each company > RMB400 million No guidelines how sales calculated, unclear meaning of terms “change of control” and “exertion of decisive influence”

Factors MOFCOM Will Consider in Merger Review Market share of companies in the relevant market and controlling power over market Degree of market concentration Influence of merger on market access and technological acquisitions Influence of merger on consumers and other business operators

US Merger Review Hart-Scott-Rodino Act of 1976 –Pre-merger review Section 7 of Clayton Act –Mergers bad when they substantially lessen competition Department of Justice and FTC Merger Guidelines –Market concentration (HHI) –Threat to competition within relevant market

The Huiyuan ( 汇源 ) – Coca-Cola Transaction In Sept. 2008, Coca-Cola made an offer of US$2.4 billion (RMB16.4 billion), 3x Huiyuan’s stock market valuation at the time Huiyuan is a profitable private juice company After Ministry of Commerce (“MOFCOM”) reviewed deal, rejected March 17, 2009 MOFCOM said: "If the acquisition went into effect, Coca-Cola was very likely to reach a dominant position in the domestic market and consumers may have had to accept a higher price fixed by the company, as they would not have much choice.“ No definition of relevant market any specific numbers or formulas for how conclusion reached

CNOOC’s 2005 Bid for Unocal CNOOC, a Chinese oil company made a US$18.5 billion bid for Unocal, a U.S. oil company Chevron, a U.S. company also made a bid of US$17 billion for Unocal Many U.S. politicians came out against the deal claiming they did not want Unocal to be run by a Chinese company Eventually, CNOOC pulled out its bid and Chevron bought the company at a lower price

Exceptions All of the following are possible for rejecting transactions: National Security Protecting Consumer Interests: –Abusive pricing –Less choice Transparency and well-reasoned responses should be given by relevant anti-monopoly authorities

The Future Harmonized Anti-Monopoly Regimes –Global regime –Greater harmony between national laws governing when mergers can be blocked Greater transparency –Guidelines will become clearer as more matters are decided