Problems in Following E.U. Competition Law: A Case Study of Coca-Cola/Huiyuan

Abstract

China passed its Anti-monopoly Law (the “AML”) in 2007. In drafting and implementing the AML, the Chinese government appeared to have favored the E.U. model of competition law over the U.S. model. One recent example is Coca-Cola/Huiyuan, a highly controversial decision by the Ministry of Commerce (“MOFCOM”). While critics have taken the view that the decision was influenced by protectionism, a closer study of the case reveals that the outcome may have been driven by MOFCOM’s misreading of E.U. competition law. In particular, MOFCOM appeared to have applied the portfolio effects theory adopted in some E.U. and Australian cases, however, it may have failed to realize that the theory is often based on the prediction of exclusionary effects of conglomerate mergers that are too remote and speculative, leading to potential high cost of error and an over-deterrence of transactions that are efficient. Moreover, there has been an increasing international consensus that conglomerate mergers rarely pose anticompetitive effects and recent E.U. cases have required the European Commission to satisfy a high burden of proof in cases of portfolio effects. Finally, this paper discusses the enforcement challenges to MOFCOM and the need for China to introduce more checks and balances in the merger control regime.