Behind the Heat on Global Deals

Heightened antitrust action, such as China's "no" on Coke-Huiyuan, may signal creeping protectionism

The growing ranks of countries demanding a right to scrutinize mergers and acquisitions raises a serious concern: that under the guise of protecting competition, officials may block deals based on nationalism or other political objectives. Exhibit A for this worry is a recent ruling by Beijing to nix Coca-Cola's (KO) planned $2.4 billion purchase of China Huiyuan Juice Group. When Coke set out to buy Huiyuan last September, the deal hardly seemed worthy of antitrust review, at least by U.S. standards. Together the companies would have controlled less than 20% of China's juice market, according to Coke. But on Mar. 18, China's Commerce Ministry said the combined companies would be too dominant.

The Huiyuan case "is nothing less than a frontal assault on foreign investment disguised as merger review," says George L. Paul, an antitrust attorney at White & Case in Washington who isn't involved in the bid.

Companies can expect stepped-up deal screening elsewhere as well. A decade or so ago about the only antitrust law anyone cared about was that of the U.S. Then the center of gravity for enforcement switched to the European Union. But now competition cops have gone global. According to a survey by law firm White & Case, 115 governments currently regulate mergers, up from 68 just five years ago.

That presents new challenges for deals. The Pfizer-Wyeth merger, for example, requires approval from antitrust regulators in the U.S., Europe, Canada, China, and Australia. With so many overseers, "you have to worry about the most restrictive jurisdiction controlling whether the deal goes through or not," says Anthony W. Swisher, an antitrust attorney at Washington's Akin Gump Strauss Hauer & Feld. And no jurisdiction is too small: The Paraguayan Congress is considering an "In Defense of Competition" bill.

The Coke-Huiyuan decision confirmed fears about a new Chinese antimonopoly law that aims to protect both "fair market competition" and the "socialist market economy." Coke CEO Muhtar Kent said in a statement that he is "disappointed" but respects the Huiyuan decision. François Renard, head of Asian antitrust at law firm Allen & Overy in Beijing, says antitrust officials seemed "keen to protect competitors rather than focusing on the actual impact of the merger on competition and thus on consumers."

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