Background

The Antimonopoly Bureau of China’s Ministry of Commerce (MOFCOM), in its most detailed decision so far, cleared the proposed acquisition of Sanyo by Panasonic subject to conditions. MOFCOM adopted this decision in October 2009, following six months of investigation.

Antitrust issues

According to MOFCOM, Panasonic and Sanyo would have a combined global market share of 61.6% in lithium coin batteries, where the parties are by far the largest producers and where they face little countervailing buyer power. Similarly, on the global market for Ni-MH batteries for ordinary use, their combined market share would reach 46.3% and would make them the second largest competitor. The effect of the deal on the automotive Ni-MH battery market would lead to a monopoly (Panasonic already has a 77% market share following its joint venture with Honda and the rest of the market is divided between Panasonic and Sanyo).

MOFCOM’s conclusions

The acquisition was approved but only following the imposition of the following conditions which must remain in place for at least three years:

  • Subject to MOFCOM’s approval, Sanyo is to divest all businesses in lithium coin batteries and in Ni-MH batteries for ordinary use, and Panasonic is to divest its business in automotive Ni-MH batteries.
  • The divestitures must take place within a six month period after the merger.
  • Panasonic is to reduce its equity stake from 40% to 19.5% in its joint venture with Honda.
  • Panasonic must also give up some of its control rights in the joint venture and its name can no longer be part of the joint venture’s corporate name.

The merger was also approved subject to commitments by the European Commission at the end of September. The market definitions in MOFCOM’s and the Commission’s decisions are broadly consistent. However, the Chinese authorities identified issues on the global automotive Ni-MH battery market that were significant enough to justify obtaining commitments from Panasonic in this regard. This contrasts with the European Commission’s view that “although the transaction would create a leading player in Ni-MH, it does not give rise to any competition issues” because the technology is soon going to be displaced by Li-ion batteries for which there is ample competition.