China’s new antitrust law could influence world

Beijing, November 6:

Beijing is on its way to joining Washington and Brussels, the European Union (EU) capital, as a required stop for gaining antitrust approval for global merger deals.

Chinese officials are working on an anti-monopoly law that would require companies seeking mergers or acquisitions to notify Chinese authorities if one or more of the parties involved has $184 million of business in China.

Authorities would then review the deals for their impact oncompetition in the domestic market - just as the US and EU do. Passage of the Anti-monopoly Law is expected early next year. That prospect is filling people in Chinese business and legal circles with uncertainty as they wait for Beijing to finish up a law that will add antitrust enforcement to its wide powers over the economy.

China’s growing role in the global economy will give the law international reach. There are about 280,000 foreign-financedcompanies in China and most of the world’s biggest companies have some kind of local operation.

Drafting of the law has attracted an unusual amount of international comment and advice, particularly from US and EU governments and business groups. “China realizes that the world is watching and it must play fair in the implementation of the Anti-monopoly Law,” said James Zimmerman, a Beijing-based partner with Squire, Sanders & Dempsey LLP.

“Given the long history of state-managed enterprises and protectionism, it still is going to take time for China to fully accept cross-border mergers and acquisitions,” he said.

The most recent public draft of the law, says that any global transaction with a value of more than $25 million and in which one party has at least $184 million in sales or assets in China is subject to the notification requirement.

How such a process would play out is untested. But in similar cases elsewhere, rejection by a foreign authority has killed deals.