1970-01-01 08:33:29
A Chinese legislation expert called for more rational reflection on Coca-cola's rejected acquisition of a Chinese brand from the perspective of the Anti-monopoly Law. The case aroused a lot of controversy in and outside China over the implications of the case on national brands protection and China's policy on foreign investment.
"Neither national brands nor foreign investment access is subject to the Anti-monopoly Law," said Professor Huang Yong of the University of International Business and Economy, who participated in the law's legislation.
He thinks that correct procedure has been strictly observed in the whole process concerning the anti-monopoly review of the Coke case. However, more has to be done regarding transparency, especially in the announcement of the review result.
The Chinese Ministry of Commerce, the authorities responsible for the anti-monopoly review of acquisition and merger deals, ruled in March that Coke's proposed buyout of Huiyuan, a fruit juice maker and seller in China registered in the Cayman Islands, would impair market competition.
The ruling has sparked many debates. Chinese netizens and experts hailed that a famous Chinese brand was protected. But foreign media questioned the possible changes of China's foreign investment policy. There is also concern about whether Chinese companies will face retaliatory barriers when they go international.
"It's not the purpose of the Anti-monopoly Law to protect Chinese brands or regulate the access of foreign investment," Huang insisted, pointing out that the Anti-monopoly Law aims to maintain a fair playing field for all competitors, whether foreign or Chinese, state-owned or private.
He has noticed that the Ministry of Commerce did not mention anything about the national brands in its announcement of the ruling.
There are other laws and regulations governing national brands and foreign investment. For example, there are articles about traditional famous Chinese brands in rules about foreign investors' buyout of Chinese companies and a catalogue specifies the industries in which foreign capital is encouraged, limited or prohibited.
Those laws and regulations complement with the Anti-monopoly to build a complete legal framework regulating a market economy. But each of them has its own judiciary capacity.
The Anti-monopoly Law also provides that dealers have to go through a national security review when necessary. However, a fruit juice case has nothing to do with national security. Even if such a review is considered necessary, it will be done by other mechanisms and institutions other than the Anti-monopoly Law and its enforcement authorities.
Prof. Huang is not worried about possible retaliation on Chinese overseas investment. He believes that the competition law in any law-ruled economy is based on the same values as China's Anti-monopoly Law. In many economies with fully developed anti-monopoly systems, the reviews on M & A deals are undertaken by independent institutions.
By the same token, the barriers of national security and market access that Chinese companies have encountered in overseas markets are not set by the competition law of those markets.
For example, the Australian Competition and Consumer Commission decided on March 25 that it will not oppose the proposed acquisition of various interests in Rio Tinto plc and Rio Tinto Limited (Rio Tinto) by Chinalco as it would be unlikely to result in a substantial lessening of competition. However, the national security review and market access of foreign investment are subject to Foreign Investment Review Board of Australia.
"We also have to believe the ‘power of market'," Huang added, "Investors, either Chinese or foreign, know how to find the best place to invest."
In his analysis of the case, he has found that the review process has fully followed the procedure in compliance with the law. However, it is rarely possible to make any objective judgment on the ruling before enough information on business data and methodology used in the case is accessible.
"It involves very complicated, comprehensive analysis from the perspective of both law and economics," he said.
It is a common international practice that the hearing of M & A reviews are not open to the public to protect business secrets.
However, there is concern about how much should be disclosed after the ruling is decided. In the practice of the EU and the US, much more details are usually released than China has done.
Prof. Huang stressed that transparency is very important in law enforcement, noticing that criticism from foreign media and investors in this case has more focused on the transparency than on the decision itself.
"It takes time for the public and the enforcement authorities to understand and improve this law which only has been in effect for 10 months," he said.
More detailed implementation rules are being formulated. Prof. Huang said much feedback from the public, including foreign investors, has been reflected in the revised drafts of those rules.
China's Anti-monopoly law took effect on August 1, 2008. The first guideline for the enforcement of the law, issued a few days after that, is about business combinations.
The MOC has received 40 anti-trust applications from companies since then. It has investigated 29 of the total and draw conclusion on 24, of which 23 have been approved unconditionally and one has been approved conditionally with remedy measures.
According to the Ministry of Commerce, 4,966 M & A deals have been approved since 2003 when the provisional regulations for foreign investors' buyouts of domestic companies were promulgated.
By People's Daily Online