Under the radar

By Phil Taylor.

Coca-Cola. Huiyuan Juice. Two names which strike fear into the hearts of company legal counsel who practise anywhere near China. The failed deal between the beverage companies – one an international household name, the other a Chinese local hero – has come to represent the great “what if” for mergers and acquisitions in mainland China.

    Competition lawyers and in-house counsel will find it hard to forget the Financial Times headline of March 18: China blocks Coca-Cola bid for Huiyuan. The halting of the deal by the Ministry of Commerce (Mofcom) on the grounds that Coke may take advantage of its dominant position in soft drinks to unfairly affect competition in the juice sector led to hot debate and the ultimate scrapping by Coca-Cola of its plans to expand into a new and lucrative market.

    It is no surprise, then, that companies planning a tie-up which may have an effect on competition in China (such as global mining companies Rio Tinto and BHP Billiton) are wary of doing anything which might require a merger filing. Despite reassurances from some specialists, including public comments from a senior commissioner of the US Federal Trade Commission (see also Storm in a juice cup, CLP April 2009, page 8), the message that many foreign companies have taken away is Buyer Beware: any significant acquisition that is likely to affect the Chinese market will come under intense scrutiny by the anti-monopoly agencies and could well be blocked – or have stringent conditions imposed on it – at the outset.