China: China Conditionally Approves Google’s Acquisition Of Motorola Mobility

Last Updated: 30 May 2012
Article by Peter Wang and Yizhe Zhang

On 19 May 2012, the PRC Ministry of Commerce ("MOFCOM") approved the acquisition by Google Inc. of Motorola Mobility, Inc. under the Chinese Anti-Monopoly Law ("AML"), but imposed conditions to require that Google continue to license the Android operating system and the patents acquired from Motorola in the same manner as Google currently does.

MOFCOM's decision once again demonstrates China's increasing influence on merger review of global transactions. Indeed, other regulators around the world, notably in the U.S. and the EU, approved the transaction without imposing any remedy. This is the third recent decision in the IT industry, after Western Digital/Hitachi and Seagate/Samsung (see our March 2012 Alert, Lessons from China's Merger Review Decisions Learned in Recent Hard Drive Acquisitions), in which MOFCOM came to a different conclusion than other antitrust authorities despite the global nature of the markets at issue.

Competition concerns raised by MOFCOM

MOFCOM defined the relevant product markets as those for smart mobile devices and the operating systems for such devices, finding that such markets are worldwide in scope. It recognized that Google has a high market share in such operating systems (79% of the China market at the end of 2011). Considering the high dependence on Android by device manufacturers, and Google's strong financial resources and R&D capability, MOFCOM concluded that Google has a dominant market position in smart mobile operating systems. MOFCOM found the device market to be highly competitive, with Motorola possessing no apparent competitive advantage. MOFCOM also recognized that many of the Motorola patents that Google would acquire as part of the transaction are essential patents that device manufacturers must use in order to produce their products.

Despite the worldwide nature of these markets, MOFCOM explicitly indicated that its analysis placed an emphasis on the dynamics of these markets in China.

The first concern raised by MOFCOM is that, post-transaction, Google could license Android to its Motorola division under conditions more favorable than those offered to competitors, thereby putting the latter at a competitive advantage. This contrasts with the conclusion reached by the European Commission (and presumably also other antitrust authorities), after questioning of numerous market participants, that Google would not have the incentive to engage in such discrimination.

MOFCOM's second concern was that Google would be able to abuse its dominant position – presumably in the mobile operating system market – for example by imposing unreasonable terms and conditions in the licensing of Motorola's patents. This also contrasts with the different conclusion (requiring no remedy) reached by the European Commission and presumably other authorities – notably relying on Google's public pledge to continue Motorola's policy to license such essential patents under FRAND terms.

Conditions imposed

In order to alleviate such concerns, MOFCOM agreed to clear the transaction only under the following conditions:

  1. Google will license Android free of charge and in open source, consistent with its current commercial practice.
  2. Google will treat all original equipment manufacturers (i.e., mobile terminal manufacturers) in a non-discriminatory manner with respect to the provision of Android.
  3. Google will continue to comply with the obligations Motorola currently undertakes with respect to its (presumably only essential) patents to license them on fair, reasonable and non-discriminatory (FRAND) terms.
  4. Google will appoint an independent supervising trustee to supervise its performance of these conditions.

The first two obligations are imposed for a period of 5 years, although Google may request MOFCOM to change or terminate them before the expiry of that period. After 5 years, MOFCOM may continue to evaluate the market conditions of China's smart mobile device and operating systems markets, and may make further decisions based on the result of its evaluation.


This is not the first time that MOFCOM has reached a different conclusion with respect to a major global M&A transaction, imposing remedies where other regulators have not done so (e.g., InBev/Anheuser-Busch; General Motors/Delphi) or that go beyond those imposed by other antitrust authorities (e.g. Western Digital/Hitachi, Seagate/Samsung).

There are several possible explanations for MOFCOM's more aggressive approach.

The first reason is that MOFCOM's mandate for merger review under the AML goes beyond pure antitrust concerns. In particular, MOFCOM must take other factors into consideration, such as the impact of the proposed transaction on China's national economic development. In this case, it is possible that MOFCOM was concerned that Google would be able to harm Chinese handset manufacturers post-transaction, thereby hampering a major Chinese industry and impacting national economic development. Similar concerns affected a number of recent decisions including the Western Digital/Hitachi and Seagate/Samsung mergers and the Russian potash merger.

A second reason might be that MOFCOM is less experienced with vertical mergers and therefore tends to rely on less developed antitrust theories. In particular, MOFCOM might be less experienced with analysis of a dominant firm's ability and incentive to foreclose competition in a vertical merger. In this respect, it is striking that the current decision provides little explanation regarding Google's ability and incentives post-transaction to foreclose competition.

Thirdly, MOFCOM also seems to be less comfortable with "informal" remedies such as those that were on the table in this transaction, notably Google's pledge to continue licensing Motorola's patents. MOFCOM seems to prefer that such commitments be set in stone as formal remedies. MOFCOM also did not seem to take at face value the parties' argument that they lack the incentive to discriminate against other terminal manufacturers with respect to Android, preferring that Google offer a commitment in this respect (and probably assuming that if Google claims it has no incentives to discriminate, it should not be an issue to offer a commitment).

The Google/Motorola decision also further highlights what appears to be MOFCOM's pattern of seeking ways to maintain the competitive status quo when confronted with potentially problematic transactions. This sometimes manifests itself in conduct remedies essentially requiring parties to maintain their pre-transaction course of conduct, such as in GM/Delphi (non-discrimination commitments in vertical deal) and the Russian potash deal (commitment to continue supply to China), as well as in the Google-Motorola transaction. At other times it takes a more complex turn, as in the recent HDD cases, where the parties were required to maintain themselves as independent competitors post-closing.

Finally, the decision raises an interesting issue regarding the division of jurisdiction between MOFCOM (in charge of merger review) and the two non-merger antitrust agencies (NDRC and SAIC). Indeed, the type of behavior that MOFCOM is targeting (excessive prices, discrimination, refusal to license, etc), typically would fall under the abuse of dominance provision of the AML, which are under the jurisdiction of the other agencies. MOFCOM may more systematically impose behavioral remedies on vertical mergers involving dominant undertakings, even if the merger does not change the dominant firm's incentives.

MOFCOM's decision can be found in Chinese at the MOFCOM website.

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

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

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
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
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 (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

To Use 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.


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.


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