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2009-03-19 | All chapters

Coca-Cola Deal First to Be Blocked Under Chinese
Dune Lawrence, Bloomberg, 18th March 2009

March 18 (Bloomberg) -- China’s rejection of Coca-Cola Co.’s $2.3 billion bid to buy China Huiyuan Juice Group Ltd. is the first denial of an acquisition under an anti-monopoly law that’s been criticized since inception for a lack of openness.

The Ministry of Commerce, which said today it rejected Coca- Cola’s acquisition as the deal would harm competition in the domestic beverage market, should publicly disclose how it reached that conclusion, said Guan Anping, a former Chinese trade official, who’s also taught anti-monopoly law at Beijing’s Capital University of Economics and Business.

“The government needs to show that every case is measured with the same ruler,” Guan, now a lawyer at law firm Anjin & Partners in Beijing, said today in a telephone interview. “Anti- monopoly laws can most help an economy when their standards and processes are in the open for all to see.”

China’s anti-monopoly law, which was passed in 2007 and took effect in August last year, has been criticized by groups such as the European Union Chamber of Commerce for having vaguely worded standards and being unclear about how its statutes are enforced. The chamber today urged the government to provide details for why it rejected Coca-Cola’s bid for Huiyuan.

The rejection of Coca-Cola’s bid is “definitely going to make foreign companies more cautious,” said Peter Wang, a partner for law firm Jones Day in Beijing, who specializes in anti-monopoly law. A lack of clarity on the timing of the review process, the standards applied and what data is used to reach a ruling are all sources of concern, he said by e-mail.

Market Share

Coca-Cola controlled 52.5 percent of the Chinese soda market by volume in 2008, compared with PepsiCo Inc.’s 33 percent, according to Euromonitor. Coca-Cola had 12 percent of the fruit- and vegetable-juice market, while Huiyuan had an 8.5 percent share. The Chinese beverage company controlled 33 percent of the nation’s pure-juice market.

Allowing Coca-Cola to buy Huiyuan would be negative for competition as the Atlanta-based beverage maker could bundle juice and soda drinks or design conditions that exclude competitors, the commerce ministry said in a statement today announcing its rejection of the acquisition.

“In the Chinese government’s view, Chinese industries are mostly still weak and they don’t want to have foreign companies come in and buy them all out,” said Xiang Wang, a Beijing based partner at law firm Orrick, Herrington & Sutcliffe LLP.

Source: http://www.bloomberg.com/apps/news?pid=20601087&sid=a0vVDxSXD9sw&refer=home