【编者按】经论文作者授权，国际经济法网将于近期陆续发表中国法学会国际经济法研究会2009年年会的会议论文。


I INTRODUCTION
On March 18, 2009, the Ministry of Commerce of China (“MOFCOM”) issued its NO.22 announcement, rejecting Coca-Cola’s application filing for the purchase of Huiyuan. On March 25, 2009, MOFCOM held a special press conference to clarify some factors and reasons having been considered in rejection of Coca-Cola’s acquisition. Coca-Cola submitted its initial acquisition filing in September 2008. After several supplemental submissions, MOFCOM opened a second-stage review in December. Today’s decision has involved in such authority’s extensive investigation, soliciting information from other governmental authorities, trade associations, juice beverage industry competitors, suppliers, downstream sellers and the involved parties, as well as legal experts, economists and agricultural experts. Based on the information released at that press conference combing the PRC Antimonopoly Law (“AML”), we would like to briefly analyze Coca-Cola/ Huiyuan deal for our clients.

II FACTUAL BACKGROUND
Huiyuan is China’s largest fruit juice manufacturer, established as a privately owned domestic company, and subsequently listed in Hong Kong through a Cayman Island listing vehicle in 2007. On September 3, 2008, Coca-Cola publicly announced plans to acquire Huiyuan through a wholly-owned subsidiary for around HK$17.9 billion. Huiyuan’s founder and other shareholders accounting for 66% of the outstanding shares agreed to sell their stakes. The proposed transaction provoked tremendous controversy within China.

III DISCUSSION
1. Why MOFCOM reviewed the deal
(1) The deal fell into the category of concentration of business operators
According to Section 20 of AML, the term concentration of business operators refers to the following circumstances:
i. mergers of business operators;
ii. a business operator obtaining control of other business operators through the acquisition of their equity or assets; or
iii. a business operator obtaining the control of, or being able to exercise a decisive influence on, other business operators through contractual or other means.
In this deal, Coca-Cola tried to obtain the control on Huiyuan through the acquisition of the equity accounting for 66% of the outstanding shares.
(2)The amount involved in the deal reached the threshold
According to Section 3 of Provisions on the Reporting Threshold for Concentrations of Business Operators (Order of the State Council No.529) (“Provisions on the Threshold”), if a concentration of business operators would reach either of the following thresholds, the business operators shall report the same in advance to the State Council’s department in charge of commerce; and if they fail to do so, they may not proceed with the concentration:
i. the total of the global business turnover of all of the business operators who are to be part of the concentration exceeds RMB10 billion during the previous financial year and the business turnover in China of each of at least two of those business operators exceeds RMB 400 million during the previous financial year; or
ii. the total of the business turnover in China of all of the business operators who are to be part of the concentration exceeds RMB 2 billion during the previous financial year and the business turnover in China of each of at least two of those business operators exceeds RMB 400 million during the previous financial year.
According to the data released at the press conference, in 2007 Coca-Cola and Huiyuan’s turnover in China mainland market have reached approximately RMB 9.12 billion and RMB 2.59 billion respectively, which have reached the threshold set in Item ii of the above Section 3. Undoubtedly, this deal shall be subject to the antimonopoly review by MOFCOM.
2. Reasons for disapproval
(1) Factors considered in judging concentration of business operators
According to Section 27 of AML, when conducting an examination of operators of business concentration, the following factors shall be considered:
i. the market share of the business operators involved in the concentration in the relevant market and their degree of control of such market;
ii. the degree of concentration in the relevant market;
iii. the effect of the concentration of business operators on entry into the market and technological progress;
iv. the effect of the concentration of business operators on consumers and other relevant business operators;
v. the effect of the concentration of business operators on the development of the national economy; and
vi. other factors that affect market competition that the State Council's antimonopoly law enforcement authorities believe should be taken into consideration.
We’d like to point out the following points regarding Section 27.
First, as for Item v of Section 27, it’s the international common practice to consider the effect of the business concentration of operators on the development of the national economy, aiming at maintaining the effective competition from the view of macro-economy and safeguarding the public interest and the domestic market economy.
Second, as for Item vi of Section 27, “Other Factors” will be restricted to the factors limiting the competition, excluding other political and emotional factors.
Considering all the above factors, MOFCOM independently issued its administrative decision after conducting extensive investigations and estimating the deal from all-round aspects.
(2)The relevant business operators’ market shares
According to the data released at the press conference, currently Coca-Cola has achieved 60.60% market share in the carbonated-beverage market. Meanwhile, according to the data available on the Internet, Huiyuan has gained 10.30% market share in the juice-beverage market.[1]
(3)Relevant market considered
According to Section 12 of AML, “relevant market” means the spectrum of goods and geographical area within which a business operator competes during a certain period with respect to specific goods or services.
In this case, Coca-Cola produces carbonated beverages and juice beverages while Huiyuan focuses on juice beverages. MOFCOM considered the juice-beverage market as the relevant market for this case in that under this scenario, if without Coca-Cola’s acquisition of Huiyuan, Coco-Cola and Huiyuan, two separate competitors, would have market competition, concentrating in the juice-beverage market, not the carbonated-beverage market. The legislators introduced the concept of the western economic theory into AML to define “relevant market”.
(4)Potential effect if the deal approved
Both the carbonated beverages and the juice beverages belong to the soft drinks. Coca-Cola has already won the dominant position in the carbonated-beverage market. If the deal were approved, it would inevitably strengthen its position in the juice-beverage market as well as the whole soft-drink market. So to maximize its profit, MOFCOM believes that Coca-Cola would, after the deal, leverage its position in the carbonated-beverage market to increase its sales in the juice-beverage market, through tying or bundling arrangements or the imposition of other restrictive conditions, leading to fewer options and higher prices for consumers, harming the public interest.
(5)No protectionism involved in this case
Reform and Open-up Policy is China’s long term national policy and China extends warm welcome to foreign investments, beneficial to Chinese economic development. According to the data released at the press conference, since 2003 when the Tentative Provisions for Acquisition of Domestic Enterprises by Foreign Investors came into force (effective on April 12, 2003), MOFCOM has approved 4,966 M&A application filings. Furthermore, according to the data available on the Internet, since AML took into effect on August 1, 2008, MOFCOM has approved around 40 M&A application filings, among which INBEV N. V./S. A. successfully acquired ANHEUSER-BUSCH COMPANIES INC.[2] MOFCOM rejected Coca-Cola’s application filing, purely aiming at maintaining the effective market competition in China soft-drink market, promoting the wholesome development of the beverage-industry competitors and fostering the health market, without so called “protectionism” involved.

IV LOOKING INTO FUTURE
Coca-Cola/Huiyuan is merely an individual case, which does not indicate that foreign investments will be hindered by AML. We hereby believe that China M&A policy is and will be consistent in the long term.

杨海东 美国德汇律师事务所法律顾问。
[1]See on http://www.china.com.cn/news/txt/2009-03/20/content_17477504.htm
[2]See on http://news.sohu.com/20090319/n262896946.shtml