Financial Times Editorial Comment: Antitrust in China

Financial Times Editorial Comment: Antitrust in China
Copyright The Financial Times Limited 2009
Published: May 4 2009 19:00 | Last updated: May 4 2009 19:00
http://www.ft.com/cms/s/0/c7236f86-38d4-11de-8cfe-00144feabdc0.html


China has given notice that it will not tolerate abuse of monopoly power, in industry if not in politics. Since it enacted an antitrust law last August, the Ministry of Commerce has made three important rulings. In the latest, it imposed restrictions on the $1.6bn takeover by Japan’s Mitsubishi Rayon of the UK’s Lucite International, forcing the latter to sell half of its production of one polymer at cost. In March, it rejected Coca-Cola’s planned $2.4bn takeover of Huiyuan, a Chinese juicemaker, in a ruling that surprised many lawyers. Before that, it had imposed restrictions on InBev’s $52bn acquisition of Anheuser-Busch even though, like Mitsubishi/Lucite, it was a global transaction with only secondary implications for China.

The three rulings require careful attention. They demonstrate that the Ministry of Commerce is serious about implementing its anti-monopoly law. They also show that Beijing will not hesitate to intervene in largely extra-territorial deals. That means China has joined the US and the European Union as a global competition referee, providing M&A lawyers with a fresh set of problems to wrestle with.

China’s rulings are too opaque. The latest – though an improvement on the first two – was delivered in less than two pages, a level of detail that falls far short of other competition authorities. At least it was based on the fact that Mitsubishi/Lucite would have a 64 per cent market share for methyl methacrylate, a polymer that ends up as acrylic glass. The Coke ruling, equally brief, did not convincingly identify competition concerns. Instead, it looked suspiciously like an attempt to defend a popular local brand after a vigorous internet campaign opposing Coke’s encroachment. The InBev/Anheuser-Busch ruling also puzzled lawyers; it declared there were no competition concerns, but imposed restrictions on the merged entity’s actions.

Beijing is right to enforce anti-monopoly laws. Moreover, its market is significantly large to justify it making rulings on mergers of a global nature, just as Brussels and Washington do. But China must be seen to be fair. In particular, it must not confuse antitrust with industrial policy – a suspicion raised by the rejection of the Coke deal. If the perception takes hold that Beijing is dressing up protectionist sentiment in antitrust robes, other governments will react in kind. That could provoke a nasty tit-for-tat trade war. From now on, China’s antitrust rulings should be more fully explained. If there are no genuine competition concerns, deals must be allowed to proceed unhindered.