The Politicization of National Anti-Monopoly Laws

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

2. 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

3. China’s Anti-Monopoly Law(中华人民共和国反垄断法) • Adopted in Aug. 2007, went into effect Aug. 2008 • 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”

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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