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What are the potential outcomes of a merger control investigation in China?
In mergers involving raw materials such as potash, copper concentrates and soy beans, the Ministry of Commerce required:
- Russian potash producers to continue to sell to Chinese customers – Uralkali/Silvinit merger;
- the merged entity to supply copper concentrate to Chinese customers and regulated the sales terms of zinc and lead concentrate – Glencore/Xstrata merger; and
- the merging parties to operate independently, such that prices remained competitive for Chinese customers – Marubeni/Gavilon merger.
In mergers involving gasification technology, hard drives, standard essential patents, patent licensing services and LCD TV chips and mobile phone chips, the ministry imposed the following conditions:
- the joint venture must not use the supply of raw coal for gasification technology as a means of forcing licensees to use the joint venture’s technology – GE/Shenhua merger;
- in a merger in which the purchaser and the target were producers of hard drives, the purchaser was prohibited from exercising control over the target for a period of time – Seagate/Samsung and Western Digital/Hitachi mergers;
- standard-essential patent holders must agree to the licensing terms that the patent holders have already voluntarily agreed to within the standard-setting organisations – Google/Motorola and Microsoft/Nokia mergers;
- standard-essential patent holders must agree not to sue patent infringers, even though this was already voluntarily agreed to – Microsoft/Nokia;
- a patent holder must license its patents based on non-exclusive and non-sub-licensing terms and comply with reasonable and non-discriminatory principles – Merck/AZ Electronic Materials merger;
- a supplier of patent licensing services must continue to release information on a non-discriminatory basis for eight years. If the competitive situation changes during this time the entity can request reconsideration – ARM/Giesecke/Devrient merger; and
- in a merger in which the purchaser and the target produced LCD TV control chips, the purchaser was prohibited from exercising control over the target for three years. After the three-year period the entity may ask for reconsideration. The ministry also required that the prices for customers in China should not be higher than the prices of similar products that the purchaser and target sold outside China – MediaTek/MStar merger.
In mergers with assets outside China that could potentially be of interest to the ministry, it ordered the following extraterritorial divestitures and asserted its extraterritorial authority by including a provision that it would review and authorise such extraterritorial divestitures:
- a business in Japan – Panasonic/Sanyo;
- a mine in Peru – Glencore/Xstrata; and
- parts of a business in the United Kingdom and the United States – United Technologies/Goodrich.
The Microsoft/Nokia merger excluded Nokia’s reserves of standard essential patents related to telecoms and smartphones. However, the ministry included these assets in the review and imposed conditions on Nokia with regard to how it could use these patents in the future.
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