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

Last Updated: 18 July 2012
Article by Xiao Yong and Li Zhaohui

On May 19, 2012, the Chinese Ministry of Commerce (MOC) announced its conditional approval of the proposed acquisition of Motorola Mobility Inc. (Motorola) by Google Inc. (Google).1 This is the thirteenth conditional approval imposed by MOC since China's Anti-monopoly Law (the AML) came into effect on August 1, 2008. The approach taken by MOC, as well as the conditions MOC placed on the transaction, yet again signal that the Chinese antitrust regulatory review process will play a significant and growing role in global M&A transactions affecting Chinese markets.


On August 15, 2011, Google and Motorola announced that they had entered into a definitive agreement under which Google would acquire Motorola for US$40.00 per share in cash, or a total of about US$12.5 billion. By acquiring Motorola, Google obtains control of a portfolio of approximately 17,000 issued patents and 6,800 patent applications, including hundreds of standards essential patents (SEPs) relevant to wireless devices. Although Google announced its intention to run Motorola as a separate business, the vertical integration of Google's mobile computing platform, Android, with Motorola's patent portfolio and device business is expected to enhance Google's ability to compete with other mobile operating systems. Because both Google's and Motorola's businesses have substantial worldwide footprints, the transaction drew international attention from competition authorities, including the U.S. Department of Justice (DOJ), the European Commission (EU), and MOC.

On February 13, 2012, both DOJ and EU approved the Google-Motorola acquisition without conditions. Both regulatory authorities took into account public commitments made by Google to continue non-discriminatory licensing of Motorola's SEPs, and each concluded that the transaction would not be likely to lessen competition in their respective markets. MOC, however, chose to impose conditions on the transaction. Notably, MOC reached different conclusions from DOJ and EU regarding the competitive effects of the transaction, despite the similar nature of the relevant markets at issue.

MOC's review process also took somewhat longer than the DOJ and EU reviews. Google and Motorola initially gave notice to MOC of their transaction on September 31, 2011, but the notification was not deemed complete or formally accepted by MOC until November 21, 2011. Similar to some other cases announced late last year and early this year with conditional approvals, MOC exhausted the full statutory review periods (i.e., taking 180 days from formal acceptance to review the transaction). As such, it took Google and Motorola 233 days after giving initial notice to MOC to obtain conditional clearance for the transaction. Upon the receipt of MOC approval, Google finally cleared the last of the many regulatory hurdles facing the transaction, and the acquisition closed on May 22, 2012.

MOC's Substantive Assessment

Comparing the published decisions of EU and MOC demonstrates that, although each agency uses a similar analytical approach and focus on similar issues, they sometimes reach dramatically different conclusions.

According to the published decision, MOC primarily focused on the following issues:

Definition of Relevant Product Market

MOC defined the relevant product markets for the transaction as (i) the market for smart mobile devices, and (ii) the market for smart mobile operating systems (Mobile OSs), which is basically consistent with the definition of the relevant product markets by EU. However, while MOC considered these product markets as a part of a world-wide geographic market, it focused its review substantially on the Chinese market, while EU considered these relevant markets on a European Union basis or world-wide basis.

In addition, EU analyzed SEPs, as inputs for smart mobile devices, as a third relevant product market. Though MOC took SEPs into consideration when assessing the competitive implications of this transaction, MOC did not analyze SEPs as a separate relevant product market.

Whether Google Has the Ability and Incentive to Foreclose Downstream Competitors by Abusing Its Dominant Position in Mobile OS

MOC held that Google has a dominant market position in Mobile OSs, and projected that it would retain or strengthen its dominance in the near future, in light of the dependence original equipment manufacturers (OEMs) have on Google's Android Mobile OS, and in light of Google's financial strength, research and development capabilities, and high market access.

Having concluded that Google holds a dominant market position in Mobile OSs, MOC concluded that, following the acquisition of Motorola, Google would have the ability and incentive to favor Motorola over other Android OEMs, e.g., by denying other Android OEMs the latest versions of the Android Mobile OS. Based on their investigation, MOC noted that Google has historically selected a lead OEM to test the newest version of Android, and expressed a concern that after the transaction, Google would choose Motorola as its exclusive partner to test future versions of Android, impairing other OEMs' ability to compete. MOC did not comment in its published decision, however, as to why it believed Google would have an incentive to disfavor other Android OEMs.

By contrast, EU also considered this issue, but reached an opposite conclusion. EU did not specify whether Google has any dominant position in Mobile OS, and maintained that (i) the ability of Google to favor a specific Android OEM would not change as a result of this transaction, because such opportunities existed prior to the transaction, and (ii) Google lacked the incentive to restrict other OEMs' access to Android, as doing so would jeopardize Google's mobile search and advertising revenues â€" a business that represents more than 90 percent of Google's revenues.

Whether Google Has the Ability and Incentive to Use Motorola's SEPS to Significantly Impede Effective Competition

Like EU and DOJ, MOC recognized that the rationale for this transaction resides in the acquisition of Motorola's patent portfolio. Considering Google's strong capability in developing and integrating software and hardware paired with its dominant position in the market for smart mobile devices, MOC held that following the transaction, Google would have the ability and the incentive to impose unreasonable licensing conditions on third parties seeking to use Motorola patents. MOC further held that if Google were to impose such conditions, Google could restrain competition in smartphones and adversely affect consumers.

EU again reached an opposite conclusion from MOC. EU observed that Google was bound by Motorola's existing commitments to license its SEPs to others on fair, reasonable and non-discriminatory (FRAND) terms, and noted that Google had committed in a February 8, 2012 letter to various standards organizations that it would remain bound to Motorola's FRAND commitment and honor Motorola's current maximum royalty rates.2

In addition, DOJ concluded that though Google's substantial share in the market for Mobile OS makes it more likely that the additional SEP portfolio could be used to block rivals, Motorola had had a long and aggressive history of seeking to capitalize on its patents and had been engaged in extended disputes with Apple, Microsoft, and others. As such, the transaction was deemed unlikely to materially alter Motorola's existing policies or substantially lessen competition. Like EU, DOJ also took into account Google's February 8 letter when assessing the licensing issue.

Whether Google Will Change Its Current Business Model: Free and Open Source Android Mobile OS MOC emphasized that OEMs, software developers, and users have invested substantially in the Android Mobile OS, and as such, there would be extremely high commercial costs for OEMs to switch from Android to other Mobile OSs. MOC also found that the free and open source model of Android was key to its success of gaining dominant market position in a short period of time. MOC deemed it essential that Google maintain its open source business model after acquiring Motorola. Though MOC argued that any change to the open source model would cause significant adverse implications to OEMs, MOC did not state any basis for concern that Google actually intended to change the Android business model, and did not describe how and to what extent a change of business model by Google would adversely impact market competition.

EU, on the other hand, concluded that Google has an incentive to increase its base for search and advertising services, from which Google derives the majority of its revenues. Any change to the open source business model, the EU reasoned, might cost Google some of its Android OEM partners and ultimately reduce use of its search and advertising services. Moreover, to the extent that changing the Android business model would have market impacts, those impacts are not necessarily unique to the Motorola transaction, given that Google could have changed its approach to Android regardless of its owning a hardware partner.

MOC's Remedies

In light of the foregoing conclusions and after consultation with Google, MOC finally agreed to clear the transaction under the following conditions:

1. Google must continue to license Android free of charge and on an open source basis;

2. Google must treat all OEMs in a non-discriminatory manner with respect to the Android Mobile OS;

3. Google must honor Motorola's existing FRAND commitments with respect to Motorola's patents; and

4. Google must appoint an independent supervising trustee to supervise its performance of the foregoing obligations.

Obligations (1) and (2) shall be in effect for five years as long as Google controls Motorola. If there are any changes in market conditions or competitive conditions, Google has the option to apply to MOC in order to remove or change these two obligations.

In addition, during the five-year period, Google is required to report to MOC and the supervising trustee semiannually for compliance purposes.


The Google/Motorola transaction is another example of how MOC will follow its own approach in assessing global M&A transactions, and may reach conclusions distinct from antitrust authorities in the U.S. and Europe. MOC's unique conclusions may result in part from its relative inexperience in transactions that increase vertical concentration. Its published decision provided little reasoning to support its conclusions as to Google's ability to foreclose competition and little explanation of why Google would have an incentive to do so. In addition, MOC's determination that this vertical transaction could have anti-competitive effects seemed to derive primarily from its conclusion that Google holds a dominant market position in Mobile OS, not any real analysis of the vertical relationship between Google and Motorola. Unlike DOJ and EU, each of which have developed their own dedicated guidelines in respect of vertical and horizontal transactions over time, MOC is still in the formative stages of developing its theories and rules for antitrust review. In addition, MOC is still inexperienced in reviewing transactions that involve the complex interaction of intellectual property rights and antitrust enforcement. Though MOC recognized that the Google-Motorola transaction was primarily driven by Google's desire to acquire Motorola's patent portfolio, the published decision sheds little light on MOC's reasoning and analysis with respect to the competitive impacts of intellectual property transfers, and it is unclear whether MOC specifically considered those impacts when conducting its substantive assessment. For now, MOC's recent decisions underscore the increased importance of implementing a carefully planned Chinese merger strategy when a transaction involves firms with operations in China.


1 MOC's decision is available at policyrelease/domesticpolicy/201206/20120608199125.html .

2 Google sent the letter to the following organizations: the Advanced Television Systems Committee (ATSC); the Consumer Electronics Association (CEA); the Institute of Electrical and Electronics Engineers (IEEE); the European Telecommunications Standards Institute (ETSI); the International Electrotechnical Commission (IEC); the International Organization for Standardization (ISO); the International Telecommunication Union (ITU); the Joint Electron Devices Engineering Council (JEDEC); the Near Field Communication (NFC) Forum; the Open Mobile Alliance (OMA); the Society of Motion Picture and Television Engineers; TechAmerica; the Telecommunications Industry Association (TIA); and the Wi-Fi Alliance. The letter is also published on Google's website at:

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.

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”

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
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

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