China has given notice that it will not tolerate abuse of monopoly power, in industry if not in politics. Since it enacted an anti-trust law last August, the Ministry of Commerce has made three important rulings. In the latest, it imposed restrictions on the $1.6bn takeover by Japan's Mitsubishi Rayon of the UK's Lucite International, forcing the latter to sell half of its production of one polymer at cost. In March, it rejected Coca-Cola's planned $2.4bn takeover of Huiyuan, a Chinese juicemaker, in a ruling that surprised many lawyers. Before that, it had imposed restrictions on InBev's $52bn acquisition of Anheuser-Busch even though, like Mitsubishi/Lucite, it was a global transaction with only secondary implications for China.
The three rulings require careful attention. They demonstrate that the Ministry of Commerce is serious about implementing its anti-monopoly law. They also show that Beijing will not hesitate to intervene in largely extra-territorial deals. That means China has joined the US and the European Union as a global competition referee, providing M&A lawyers with a fresh set of problems to wrestle with.
China's rulings are too opaque. The latest – though an improvement on the first two – was delivered in less than two pages, a level of detail that falls far short of other competition authorities. At least it was based on the fact that Mitsubishi/Lucite would have a 64 per cent market share for methyl methacrylate, a polymer that ends up as acrylic glass. The Coke ruling, equally brief, did not convincingly identify competition concerns. Instead, it looked suspiciously like an attempt to defend a popular local brand after a vigorous internet campaign opposing Coke's encroachment. The InBev/Anheuser-Busch ruling also puzzled lawyers; it declared there were no competition concerns, but imposed restrictions on the merged entity's actions.