1. Professor Deborah Healey
UNSW Law
Professor Deborah Healey
Competition and Nationalism in Merger Review: Where does China Fit?
Asian Competition Forum Hong Kong December 2017

2. Summary of Presentation
Globalisation as a backdrop to commerce
The AML and its Chinese characteristics
How do these features impact application and enforcement of the AML?
Mergers as examples

3. Competition law
“Level playing field” for market competition creates efficiencies which deliver benefits to the economy and to consumers
Individual jurisdictions control the content of their competition laws: laws can make markets effective but can also impede competition
Individual characteristics such as objects, wording of individual provisions, and enforcement capacity and methods impact outcomes

4. Issues of globalisation
“Global markets create opportunities to buy, sell and work; they reduce costs of production and waste; they direct assets to their highest and best uses… The promise is universal. It is addressed to all. It is attractive and few are indifferent to its allure…Yet the promise is also vague and often ephemeral… Few doubt that global competition produces wealth for some, but many do not see it for themselves…Many not only doubt that they will receive benefits from global competition but also fear its consequences, and see global markets as more likely to harm than to benefit them”
( Professor David Gerber)

5. Globalisation Not everyone is a winner
There are no “one size fits all” impacts or solutions from globalisation
Individual competition laws involve normative judgments about the goals and acceptable costs of a competition regime, and these vary from country to country
As to competition law
There is no global competition law but some accepted truths
Some attempts at harmonisation
Laws of individual states govern global markets and those with sufficient economic leverage or political power to enforce their laws outside their borders
When states apply their laws extraterritorially they do so without consideration of the impact on other jurisdictions
Some joint jurisdictional initiatives will improve outcomes
Other impacts need to be handled jurisdictionally

6. AML after 10 years: background
Competition law with Chinese characteristics
Increasing marketisation
Large number of SOEs-scope for industry consolidation
High levels of administrative monopoly
Broad objectives
Carve outs which are similar but broader than in other competition laws e.g. Art.7
Relationship with industrial policy and sector specific regulations

7. China presents a challenge to other competition laws
Many SOEs participating in international markets
Other countries generally have only one or two in an industry
China has many in some industries
How should they be treated, for example, in relation to mergers and pricing?

8. Mergers
Area of competition law prone to conflict in a global context – historical Honeywell and Boeing mergers as examples
International complaints about Coca Cola/ Huiyuan mergers in China
Simplistic to suggest that determinations relating to different jurisdictions should always reach the same outcome
Different market makeup and buyer and seller behaviour in jurisdictions means that not all outcomes will be the same
We should strive to have similar methodologies

9. Mergers
Distinctions between approach under the AML and other jurisdictions
Similar test for examining mergers- substantial lessening of competition
Example of remedies generally – generally impact of the merger on competition and remedies to ensure that competition is not harmed
China- looks in addition at “safeguarding the legitimate rights of relevant business operators”
Other jurisdictions focus more on structural conditions
China has a clear preference for behavioural remedies
Of the small but significant number of mergers which MOFCOM imposes conditions to date, many have included detailed behavioural conditions
This is particularly so in sensitive or otherwise important industries
Some seek to maintain status quo re pricing and supply of products, some seek to delay full integration of the parties
Du Pont and Dow Chemical as an example

10. Merger regulation: purpose and practical implications
Why assess mergers?
Why are some prohibited?
What about the conditions which might be imposed?
What is the basis for allowing mergers with conditions?
How should conditions be determined?

11. Dupont and Dow Chemical
Market definition was similar to other jurisdictions: national market for agrochemical products; worldwide market for material sciences
Assets relating to herbicides and insecticides were required to be divested
Behavioural conditions:
-supply Chinese companies with certain active pharmaceutical ingredients at a reasonable price on a non-exclusive basis for 5 years after completion of the merger
- supply Chinese companies with sulfoxaflor or other preparations at reasonable prices on a non-exclusive basis for planthopper control
- not require Chinese distributors to sell on an exclusive basis certain active ingredients and existing preparations for Dow’s rice herbicides and Dow’s sulfoxaflor for five years

12. Conclusions China and its impact on global competition law:
China as a socialist market economy
China is an important player in international trade and commerce
The size and nature of its internal markets, and the nature of the AML itself, raise competition law issues for other jurisdictions in a global environment
Impact of global competition law on China:
Resolution of international mergers is fraught with difficulty and it is unlikely that determinations about mergers will be uniform
Despite this, methodology should be convergent
China takes a different approach to fashioning conditions for allowing mergers