In its first public ruling since the adoption of the new Anti-Monopoly Law (“AML”), the Chinese Ministry of Commerce (“MOFCOM”) has allowed InBev’s US$52 billion purchase of Anheuser-Busch, creating the world’s largest brewer. The conditions imposed to secure clearance may, however, leave a bitter aftertaste.  

The new competition law regime in China has attracted a lot of attention since its adoption last year and entry into force Aug. 1, 2008. The AML itself is rather vague and only provides for general principles. With most implementing rules not yet ready and a near complete lack of previous enforcement experience by the Chinese authorities, the first decisions were eagerly awaited.  

MOFCOM has approved a number of concentrations since the entry into force of the AML. However, this is the first decision to be made public, and MOFCOM has clarified it will usually only publish conditional approvals or prohibitions of concentrations. The decision, together with some guidance on merger review published by MOFCOM on its website, will allow companies and their advisers to get a feel for the enforcement of merger control in China and the procedure involved.  

MOFCOM set out its decision in a one-page document briefly stating the conditions imposed on the parties. InBev is required:  

  • Not to increase Anheuser-Busch’s existing 27 percent shareholding in Tsingtao Brewery
  • To inform MOFCOM if there is any change to its controlling shareholders in a timely manner
  • Not to increase InBev’s existing 28.56 percent shareholding in Zhujiang Brewery
  • Not to acquire shares in China Resources Snow Brewery and Beijing Yanjing Brewery  

Imposing conditions for merger clearance is nothing new. The paradox, however, lies with the fact that MOFCOM’s assessment found that the acquisition will not distort competition in the beer market in China. The conditions were justified to ensure that no further acquisitions take place that may deteriorate the competitive structure of the market in the future.  

MOFCOM has indicated that its approach to merger control is not only to contribute to the normal operation of markets, but also to the healthy development of enterprises. Preserving a “competitive” market structure has always been a concern to competition law enforcers, but imposing conditions on future acquisitions for unproblematic transactions appears little, if at all, justified on competition grounds. Businesses trying to acquire companies in China will now have to plan their future acquisition strategy carefully, including the potential impact on other business activities in China.  

Although MOFCOM has been conscious of the timeline provided for in the AML, it took several submissions of supplemental information before the preliminary review could be commenced for InBev. MOFCOM has stated it is currently working on detailed implementation rules to clarify the material required to be submitted to it for merger review. In the meantime, it is possible to submit questions in writing to MOFCOM for clarification, or refer to the notification guidelines under the older “Rules of Foreign Investors’ Acquisition of Domestic Enterprises.”  

Another point that emerged from the InBev decision was the role that competitors and other industry players may play in the competition assessment process. During the review, MOFCOM engaged in extensive consultations with other government departments, beer industry associations, domestic beer manufacturers, manufacturers of beer ingredients, and beer distributors. This is not uncommon practice, but it remains to be seen how important an involvement and influence third parties may have in the merger review process in China.  

The AML and merger control enforcement in China are still at a very early stage. The InBev decision is, however, sending worrying signals of competition law serving as a guise for industrial policy planning and national protectionism, and it is hoped that this will not become a generalized trend of competition law enforcement in China.