Only a few months after the conditional clearance of Mitsubishi Rayon’s acquisition of Lucite (Note: Hammonds’ represented Lucite), on 28 September 2009 the Chinese Ministry of Commerce (MOFCOM) cleared two foreign-to-foreign transactions, subject to conditions.
This transaction was notified to MOFCOM in June 2009 and MOFCOM decided to initiate a Phase II investigation before the Phase I deadline on the 15 July had expired.
In its decision, MOFCOM cited the significant increase in market share post-merger, the high level of concentration in the relevant market and barriers to entry, as reasons to impose remedies. To clear the deal, the parties agreed to divest Pfizer’s swine mycoplasma pneumonia vaccine business in China within the next 6 months. The divestment will include all assets, both tangible and intangible, including intellectual property, and the independent buyer must meet criteria set by MOFCOM. Pfizer also committed to provide necessary technical and supply support for three years after the divestment. MOFCOM has reserved the right to appoint another trustee if a suitable buyer cannot be found within 6 months.
MOFCOM also cleared General Motor’s (GM) acquisition of parts supplier Delphi at Phase I subject to certain behavioural remedies.
In its decision, MOFCOM voiced concerns about the likely effects of this transaction on China’s car and car parts market. After negotiation, MOFCOM accepted behavioural remedies, such as a ban on GM and Delphi exchanging trade secrets regarding Delphi’s other Chinese customers and requiring Delphi to commit to a non-discriminatory pricing policy, as conditions to clear the deal.
For parties seeking merger clearance in China, these two decisions underline the need for parties to anticipate and address the China-specific competition concerns of global transactions.