China: MOFCOM Cleared Google/Motorola Deal with Conduct Remedies

Last Updated: 30 May 2012
Article by Susan Ning and Hazel Yin

On May 19, 2012, MOFCOM cleared, with conditions, Google's acquisition of Motorola Mobility ("Motorola"), a USD 12.5 billion deal and the largest ever in Google's M&A history. The deal was announced in August 15, 2011 and obtained unconditional approval from the United States' Department of Justice and the European Commission in February 2012. This article outlines the major points of MOFCOM's conditional clearance decision of the Google/Motorola deal ("Decision").

Relevant Market

In the Decision, the product markets are defined as smart mobile devices (include smartphones, tablets, and smart TVs) and the operating systems ("OS") for smart mobile devices.

When it comes to the geographic market, the Decision is somewhat vague. The Decision simply says that the markets have the characteristics of a global market; and MOFCOM took into account the competition status in the global market yet focused on the competition status in the Chinese market. In previous conditional approval decisions, the geographic market is usually clearly defined as worldwide or China-wide with the supporting reasoning.

Competitive Analysis

According to the Decision, MOFCOM is mainly concerned with input foreclosure effects that are likely to arise as a result of the transaction and considered the following issues in its review process:

Status of the relevant market: MOFCOM recognizes that competition status of each of the two vertically-related markets has shown distinctive features. The smart mobile device market is wide-dispersed and Motorola does not have obvious advantage compared with other device makers.

On the other hand, MOFCOM considers the market for OS for smart mobile devices to be highly concentrated. The Decision cited some data of unidentified source, showing that as of Q4, 2011, Android has a market share of 73.99% in the Chinese market, whereas the shares of Symbian and iOS are 12.53% and 10.67% respectively. In light of the high market share of Android, reliance of OEMs on Android, Google's financial and technological capabilities and the high market entry thresholds, MOFCOM finds that Android has a dominant market position in the market for OS for smart mobile devices. MOFCOM also finds that Android's dominance is expected to be maintained or strengthened for a considerable period of time into the future because Nokia has gradually given up on Symbian, iPhone is more expensive than Android phones and that Windows Phone is still at the initial developing stage.

Free and Open-source: MOFCOM finds that OEMs, software developers and users have reliance on Android. According to MOFCOM, the free and open-source model is the major reason Android achieves a dominant market position within a short period of time. It is therefore essential for Google to maintain the model in order to protect the reasonable expectation and rightful benefits of the relevant parties. MOFCOM did not specify how and to what extent the business model will likely be affected by the specific transaction, causing negative impact on the relevant parties.

Fair treatment of OEMs: MOFCOM finds that Google has the incentive and ability to grant more favorable conditions to Motorola, such as providing Motorola with the latest version of Android ahead of other OEMs. MOFCOM particularly points out that Google is likely to choose Motorola as the OEM for testing the compatibility of new versions of Android before such a new version is officially launched, thereby placing the other OEMs at a disadvantage. Just like the approach it took in the previous Henkel/Tiande decision, MOFCOM did not elaborate on the reasons why Google would have the incentive to engage in discriminatory practices at the sake of its revenue-generating model that is mainly based on on-line advertisement.

Motorola patent licensing: MOFCOM recognizes that the vast number of Motorola's patents in telecommunications standards is the major drive for Google to acquire Motorola. Again, MOFCOM finds that after the transaction, Google has the incentive and the ability to impose unreasonable licensing terms to the counterparties, without elaborating on the reasons why Google would have the incentive to do so.

Market entry: MOFCOM also finds that there is significant barrier for entry into the OS market for smart mobile devices mainly because Android and iOS have already developed strong footage in the market. MOFCOM considers that in the foreseeable future, market entry is less likely to alleviate or offset the anti-competitive effects the transaction may have.

Remedies

In an effort to alleviate its concerns, MOFCOM requested Google 1) to license the Android platform on a free and open basis, consistent with the current business practice; 2) to treat all OEMs in a non-discriminatory manner in relation to the Android platform; 3) to honor Motorola's existing FRAND commitments; and 4) to engage a supervision trustee to monitor its performance of the commitments. The first two commitments have a term of five years, and Google is entitled to apply for change or termination of the commitments in case of a change of the market status. The two commitments will also elapse once Google ceases to control Motorola. During the five-year period, Google is required to report to MOFCOM and the supervision trustee every six months regarding its performance of the commitments. After the expiry of the five-year term, MOFCOM may continue to evaluate the Chinese market of OS for smart mobile devices and make a decision according to law based on its evaluation.

This is the 8th case (among the 13 conditional clearance cases up till now) where MOFCOM imposed stand-alone conduct remedies that are not ancillary to structural remedies. It is also the first time MOFCOM issued a decision on Saturday.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions