China: InBev-Anheuser-Busch: China’s First Public Merger Decision Under The AML

On November 18, 2008, the Anti-Monopoly Bureau of the Chinese Ministry of Commerce ("MOFCOM") published the first merger decision under China's Anti-Monopoly Law ("AML") and conditionally approved InBev NV/SA's ("InBev") proposed acquisition of Anheuser-Busch Companies, Inc. ("AB"). 

Between August 1, 2008, when the AML came into effect, and November 19, 2008, MOFCOM reportedly received more than 10 merger filings, accepted 13 filings, and decided eight of them.  The InBev-AB case is the first and, to date, only case in which MOFCOM has issued a public decision since the AML became effective. 

The InBev-AB decision, along with recent comments by an enforcement official, provides additional insight into merger review practice under the AML in China:

  • Process:  Consultations with MOFCOM about the information to be included in the filing may be necessary before the 30-day waiting period begins; in addition, early termination of the waiting period is possible. 
  • Substantive Analysis:  MOFCOM may use the merger review process to provide substantive views on future acquisition activity by the acquiring entity. 
  • Remedies:  MOFCOM may impose prior approval limitations on merging parties' future acquisitions, as the U.S. Federal Trade Commission generally did until 1995. 

Summary Of The Decision

In a one-page decision, MOFCOM approved the InBev/AB transaction, subject to several conditions.  The decision does not provide a detailed analysis of the antitrust issues presented by the transaction, but observes that it is a significant consolidation and that "the competitiveness of the consolidated new enterprise will be increased significantly." 

The decision also observes that the transaction will give the parties a large combined market share.  In order to "reduce the possible adverse effects on future competition in the Chinese beer market," therefore, MOFCOM required InBev-AB to obtain its consent before implementing any of the following transactions:

  • increasing AB's existing 27% equity share in Tsingtao Brewery;
  • increasing InBev's existing 28.56% equity share in Zhujiang Brewery; and
  • purchasing any stake in China Resources Snow Breweries and Beijing Yanjing Brewery, two of China's largest domestic brewers. 

InBev-AB was also directed to inform MOFCOM of any change in its controlling shareholders or "the shareholders of InBev's controlling shareholders."

Key Implications

Filing Procedure And Timing Of Review

Merging parties must be prepared to provide extensive information with their merger notification filing, and should begin preparation of filings as soon as is practical.

  • The decision underscores the importance of providing sufficiently detailed information with the merger filing to satisfy MOFCOM that it is complete. 

    • InBev first submitted its merger notification to MOFCOM on September 10, 2008, but MOFCOM did not accept the initial filing as complete. 
    • InBev made supplemental submissions on October 17 and October 23.  The official 30-day waiting period began only when MOFCOM issued its notice of acceptance on October 27, 2008. 

  • MOFCOM has yet to issue specific regulations regarding the information to be provided in merger filings under the AML.  The Anti-Monopoly Bureau has referred parties to the pre-AML filing guidelines for acquisitions of domestic enterprises by foreign investors. 

    • The guidelines instruct parties to submit extensive information about the relevant markets and the parties involved.
    • The guidelines require notarized and authenticated documents, as well as translations or abstracts of significant portions of a filing company's financial statements, which may take time to prepare.

  • The chief of the Anti-Monopoly Bureau emphasized in a recent interview that MOFCOM has the authority to make specific requirements for the notification materials on a case-by-case basis.  This suggests that parties are well-advised to engage in consultations with MOFCOM as soon as is practical to avoid material delays with the acceptance of their filing materials. 

Early termination of the waiting period in China now appears possible. Despite the delay in the start of the 30-day waiting period, MOFCOM issued its decision on November 18, 2008 – well before the expiration of that period. 

Substantive Analysis Of Transactions 

For transactions that raise substantive issues, MOFCOM is likely to solicit the views of a broad range of industry participants and third parties.  The decision reveals that MOFCOM consulted a number of stakeholders as part of its review of the transaction, including relevant government agencies, beer trade associations, domestic beer and raw material producers, and domestic beer distributors.

MOFCOM may use the merger review process to provide substantive views on future acquisition activity by the acquiring party.  

  • MOFCOM concluded that, as a result of the merger, "the competitiveness of the consolidated new enterprise will be increased significantly." 
  • MOFCOM, however, imposed conditions on future acquisitions (or change in shareholder ownership) by InBev, in order to "reduce the possible adverse effects on future competition in the Chinese beer market" (emphasis added). 

Merger Remedies

As mandated by the AML, MOFCOM will issue public decisions for only those transactions that it prohibits or on which it imposes conditions.  Article 30 of the AML requires publication of decisions that prohibit or attach restrictive conditions to mergers.

  • The AML does not require MOFCOM to issue a public decision with respect to those transactions that are approved without conditions.  In these cases, only the parties will be notified.  Whether MOFCOM nevertheless may choose to issue statements explaining its reasons for approving certain transactions remains to be seen. 
  • The InBev-AB case accordingly represents a significant milestone as the first decision under the AML that attaches affirmative conditions to a merger (presumably other decisions under the AML have involved unconditional approvals). 

MOFCOM may impose prior approval limitations on merging parties' future acquisitions, as the U.S. Federal Trade Commission generally did until 1995.

  • The remedy in this case, which prohibits InBev from acquiring interests (or additional interests) in specific beer companies, is directed at reducing the likelihood of future adverse competitive effects.  
  • In this regard, the remedy is akin to the policy the U.S. Federal Trade Commission employed for many years that required merging parties, as a condition to approval of a merger that lessened competition, to seek the FTC's prior approval for any subsequent acquisition in the affected markets for a period of 10 years. 

    • The FTC's practice differed in that it did not attach a prior approval limitation to transactions it approved without condition.  Also, the FTC abandoned this general policy in 1995 in light of its experience that the vast majority of covered transactions would be reportable under the Hart-Scott-Rodino Act. 
    • As MOFCOM reviews additional transactions under the AML, it may reach the same conclusion as did the FTC.  Here, for example, it is likely that a future InBev acquisition of control of any of the beer companies identified in the decision would trigger an obligation to notify and obtain approval from MOFCOM. 

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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
Xiaohu Ma
 
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 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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (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 www.mondaq.com

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 Mondaq.com’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.

Disclaimer

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.

Registration

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 by clicking here .

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 unsubscribe@mondaq.com 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.

Cookies

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.

Links

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.

Mail-A-Friend

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.

Emails

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 .

Security

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 webmaster@mondaq.com.

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 EditorialAdvisor@mondaq.com.

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 enquiries@mondaq.com.

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