Chinese antitrust - a new worry for oligopolies
Over the past decades, companies involved in mergers and acquisitions have had to run a double gauntlet. First, they had to convince US antitrust regulators that the deal would not hurt the consumer, something that has become pretty simple in all but a few cases. At worst, most dealmakers have to sell off a few minor operations to get approval. And the slope has indeed been slippery, as each new lenient decision sets a precedent for those that follow.
The European test has been much rougher. EU antitrust agencies have been unwilling to rubberstamp US decisions. In some cases, they've thrown a monkey wrench (spanner for our British readers) in the works, holding up mergers that were considered a done deal (most famously the 2001 rejection of the GE-Honeywell deal). In other cases, the dealmakers have had to give up more subsidiaries and operations to pass muster. Now, this strict interpretation of antitrust laws is losing ground in Europe, as we have documented before, and EU bureaucrats are more likely to follow US thinking.
But now comes a new peril. That's according to a Wall Street Journal story ("China nears law to wield power over global deals", 11/3/2005). As China rapidly takes a major role in the world economy, its opinion on mergers and acquisitions is beginning to take on importance. As companies more and more have Chinese operations and subsidiaries, China is likelier to get the chance to review big deals.
China hasn't ratified its antimonopoly laws, but according to the article:
"The most recent public draft of the law, dated July, says that any global transaction with a value of more than 200 million yuan ($25 million), and in which one party has at least 1.5 billion yuan ($186 million) in sales or assets in China is subject to the notification requirement." That would put all kinds of deals under reviews by Chinese authorities. "[The] relatively low thresholds in China's draft law have sparked concern that foreign companies will have to seek Chinese approval for deals with little impact on China."
There a number of problems, including the lack of lawyers and officials in China with any training in antitrust law and that will surely lead to delays and mistakes. But the scariest thing for large multinationals is the prospect of having to ask yet another authority for permission. Having neutralized most efforts to control oligopolization in both the US and Europe, they now face a situation and a culture where a seat at the table will be far more difficult to gain.
