First, it is no doubt that this case has become a landmark case in the developing history of China anti-monopoly law. There are four points I should address under my first topic as to why this case is so significant to China AML.
(1) It is the first prohibition decision under China AML. Before this one, there were several concentration notification cases and all of them were granted or granted with conditions by MOFCOM. Among them are some high controversial cases such as INBEV N.V./S.A. and ANHEUSER-BUSCH COMPANIES INC. concentration. In that case, MOFCOM at last granted the merger with four pre-conditions which imposed duties to INBEV N.V./S.A. to withhold its share-increasing of other domestic beer corporations and give notice to the MOFCOM of any material change of its shareholders. In the case, MOFCOM used conditions to protect the competition in the relevant market. However, there is no precedent that the application did not survive the review. It is not surprise that this result called upon so many attentions worldwide.
(2)The parties in this case are too hard to be ignored. As we all know, Coca-cola is a Fortune 500 company and each of its merger decision leads to great attention. Huiyuan is a famous domestic brand and is very popular in China. Simply put, both parties are well-known and influential.
Another sensitive factor involved in this case is: Coca-cola is a foreign acquirer, and Huiyuan, as an acquired, is a domestic brand.
(3) It is the first case that went through the whole review procedure, including discussion, preliminary review, further review and hearing. Previously, most of the decisions were done at the preliminary review process, and no one knows exactly how the review procedure runs. Now, this case offered us a good opportunity to get familiar with this procedure.
(4) It is the first time that MOFCOM provided detailed explanation of its decision. It is very helpful for us to analyze the logical pattern of the MOFCOM. Anti-monopoly law is quite new in China and there may be a lot of misunderstanding to the law: officials in MOFCOM, lawyers and competitors in the market are not well educated regards to anti-monopoly law. At this time, it is necessary for the decision-making institution to be transparent and open because criticisms and discussions are valuable for the mature of the practice.
The second topic I should cover is the great controversy incurred by the decision. The criticisms focus on three problems and some of them are long-existing problems.
(1) The terms in China anti-monopoly law are very general and offer little instructions for the practice. Enforcement institutions have a lot of discretions in interpreting the terms, which makes the review hard to be predicted. This problem has existed since the promulgation of the AML and it was mentioned again after Coca-cola and Huiyuan concentration.
(2) This case drew people’s attention to an important concept of anti-monopoly law: relevant market. Some people did not agree with the relevant market MOFCOM defined in this case. They thought it to be too narrow and soft drink market may be more proper in this case. On the contrary, some people argued that this definition is too broad and they prefer pure and middle-level juice beverage market.
However, from my point of view, the relevant market defined in this case is proper. The carbonated soft drinks and juice beverages are fundamentally different: they have different ingredients, tastes and functions, etc. Customers of one kind are not likely to transfer to another because of the characteristics of two beverages. Neither suppliers of one kind are likely to transfer to another because of the technical hurdle. According to the demand and supply substitution theory, they are not in the same relevant market. As to the juice beverage, no matter pure, middle-level concentration or low-level concentration, share some similar characteristics and possibility of substitutions exist among them. As a result, juice beverages are in the same relevant market.
(3) MOFCOM did not explain how the dominant market position in different relevant marketstransfers. As MOFCOM addressed, in this case, two sub-sectors under the non-alcoholic beverage sector are present: juice beverages and carbonated soft drinks. The relevant market in this case is the juice beverage market. However, these two markets are closely related to each other. MOFCOM further stated that Coca-Cola already had a market dominance in the carbonated drinks sector and after the merger, Coca-cola will be able to transfer its dominant market position to the juice beverage market. It is the first time MOFCOM adopted transfer theory as the basis of their decision. However, this theory is not well-accepted and there are a lot of debates about it. This theory is more like a research or creative examination right now than a mature practical pattern. Simply put, this theory itself is not so persuasive in anti-monopoly practice. What is more, MOFCOM’ conclusion did not be fully supported by the facts and its reasoning: MOFCOM did not present evidence to illustrate how this transfer happens. This absence is another reason behind the lack of persuasiveness in the judgment.