Learning by example: Four conditional reviews

MOFCOM has published four conditional approval decisions since January 2012. The decisions highlight the Ministry's approach to reviews. Understanding these decisions can help parties that may be involved in the merger control regime in future.

Henkel and Tiande Chemical joint venture

The filing was initially submitted on August 8 2011. MOFCOM gave its decision in Phase III on February 9 2012. MOFCOM found that Tiande Chemical held a market share of 45%-50% of the highly concentrated market for ethyl cyanoacetate. Henkel was not active on this mar-ket, but engaged in the production of the downstream product cyanoacrylate monomer. The JV was established to produce the downstream product and intended to source a substantial amount of ethyl cyanoacetate from Tiande Chemical. MOFCOM's investigations showed that, after establishing the JV, Tiande Chemical could pursue a discriminatory strategy in the sale of the raw material and leverage the JV with its dominant position. MOFCOM conse-quently imposed behavioural remedies requesting Tiande Chemical to supply ethyl cyanoace-tate to thirdcustomers under fair, reasonable and non-discriminatory terms.

Western Digital's acquisition of Hitachi's hard disk drive business

With a total of 11 months, the review period in this case was the most extensive reported so far. This was largely caused by the fact that the parties withdrew the original submission in Phase III, while the second filing was cleared in Phase II. MOFCOM's conclusion in Western Digital and Hitachi was in line with the Seagate and Samsung case. It was found that both mergers would have adverse effects on the competitive pressure in the hard disk drive market and would thereby increase the risk of coordination between the remaining competitors. The approval was subject to conditions like the divestiture of certain assets of Viviti, Hitachi's hard disk drive subsidiary. Deviating from the clearance decisions in the US and the EU, MOFCOM forced Viviti to temporarily remain an independent entity post-merger, which was considered a temporary prohibition by observers and casts doubt about the closing of this transaction. MOFCOM's decisions in the hard disk drive cases were considered to reflect a more industrial and political approach in its review procedure.

Acquisition of Motorola Mobility by Google

MOFCOM's decision in this case was taken after a total review time of almost eight months at the end of Phase III. While other regulators, particularly the US and EU authorities, ap-proved this transaction unconditionally, MOFCOM imposed behavioural remedies with re-gard to the licensing conditions of Google's mobile software Android and Motorola's patents. Irrespective of the global nature of the relevant markets, MOFCOM emphasised its focus on the Chinese market. With the third recent conditional approval decision concerning the IT industry in quick succession, it seems safe to conclude that MOFCOM is particularly sensitive to transactions in this sector.

Acquisition of Goodrich by United Technologies Corporation

Both companies are active in the production and sale of aviation equipment on a worldwide basis. MOFCOM's analysis focused on the global market for alternate current (AC) power generators, where the combined market share of the parties amounted to 84%. MOFCOM concluded that the acquisition would further strengthen the market dominance of United Technologies Corporation and would restrict or even eliminate competition in this market. The clearance of the transaction was subject to the divestiture of Goodrich's generator busi-ness.

By Michael Dietrich, Maria Hou and Johnny Zhao, Taylor Wessing

Back to:
A guide to anti-monopoly reviews and disputes