March 18, 2009

ECONOMIC NATIONALISM: China's statement on rejecting Coke's Huiyuan bid

"Following an investigation, the Ministry of Commerce determined: the concentration involved in this proposal would have an unfavourable impact on competition.

"Following concentration, Coca-Cola may have been able to use its dominant status in the carbonated soft-drinks market to use bundling and tie-ins of juice beverage sales or to set other exclusionary transactional terms, with the concentration restricting market competition in the juice beverage market and leading to consumers being forced to accept higher prices and fewer choices of products.

"In addition, due to restrictions on market entry by existing brands, potential competitors would have found it hard to surmount an outcome tantamount to restricting competition.

"Furthermore, the concentration would have narrowed the room for survival of medium and small-sized domestic juice firms, creating an unhealthy impact on the competitive structure of China's juice beverage market.

"To reduce the negative impact of the concentration on competition, the Ministry of Commerce negotiated with Coca-Cola about appending restrictive terms and asked the bidder to offer a feasible resolution proposal.

"Coca-Cola expressed its own opinions about the issues raised by the Ministry of Commerce, and submitted a preliminary resolution proposal and a revised proposal.

"After evaluation, the Ministry of Commerce believes this revised proposal still could not effectively reduce the negative impact on competition of this concentration. Therefore, based on Article 28 of the Anti-Monopoly Law, the Ministry of Commerce has made the decision to forbid the deal.

"The Anti-Monopoly Law review is meant to protect fair market competition and guard the interests of consumers and the public.

"The Ministry has received 40 applications since the Anti-Monopoly Law was launched on August 1, 2008, and the Ministry has, in accordance with the law, looked into 29 of them, out of which 24 cases have been decided upon (before this case).

"Among those, 23 cases were approved without any conditions; for the one that would have excluded and restricted competition, the Ministry talked with the applicant, and the applicant provided a solution for reducing restrictions on competition and made promises, for which the Ministry finally approved the deal with a restrictive condition of reducing unfavourable impacts on competition."

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