China's Ministry of Commerce (MOFCOM) on March 18, 2009, announced that it was prohibiting Coca-Cola's $2.4 billion bid to acquire Huiyuan Juice, China's leading fruit juice maker. The ruling marks the first transaction blocked by MOFCOM under China's new Anti-Monopoly Law (AML), which went into effect on August 1, 2008. An unofficial English translation of MOFCOM's announcement prepared by MWE China Law Offices for further reference is available at http://www.mwechinalaw.com/documents/mofcom09-22.htm.
In blocking the transaction, MOFCOM cited its concerns that Coca-Cola's acquisition of Huiyuan would allow Coca-Cola to leverage its dominant position in the carbonated soft drinks market into the fruit juice market, bring two leading Chinese fruit juice brands under common control, and threaten to impede the future growth of smaller Chinese fruit juice companies.
MOFCOM's decision in the Coca-Cola transaction suggests that the Chinese agency will be proactive in exercising its new merger review authority under the AML. It also suggests that the agency will be solicitous of local business interests in the exercise of its authority and, correspondingly, that proposed acquisitions of Chinese companies by foreign investors can expect to receive heightened scrutiny under the new law.
This article was originally published as an MWE China Law Offices China Law Alert.