Authored by Dr. Zhan Hao (firstname.lastname@example.org)
The deal between United Technologies (hereinafter referred to as “UT”) and Goodrich has triggered widespread discussions and guess from both Chinese and foreign antitrust, business and economist circles. On June 15, 2012, MOFCOM finally disclosed its decision, issuing the fourteenth conditional approval on the UT/Goodrich deal on its Antitrust Bulletin.
The filing submission of this transaction can trace back as early as December 12, 2011; when MOFCOM received the notification on the contemplated concentration between UT and Goodrich. Perhaps being influenced by the Chinese New Year session, it took 56 days from the parties filed at the first time to MOFCOM officially accepted the filing (namely, clock for MOFCOM starts to tick).
Through comprehensive competitive assessment on the relevant market, consultation with relevant authorities, industry associations, main competitors, upstream and downstream market players and customers, MOFCOM found that the concentration at hand may eliminate or restrict competition in the market for “Aircraft AC Power Generation System”. In order to solve the aforesaid competition concerns, MOFCOM engaged several rounds of talks with the filing parties regarding the remedies. In the end, on June 6, 2012, the filing parties submitted a final commitment on how to resolve MOFCOM’s concerns, which was recognized by MOFCOM as sufficient to prevent potential competition concerns in “Aircraft AC Power Generation System” market; thus, the concentration was cleared in the end.
According to the conditional approval, the concentration parties shall fulfill the following obligations:
1. Power system business of Goodrich shall be divested from the concentration.
2. UT shall find the purchaser for the divested business and sign the purchase agreement by the deadline set by the Anti-monopoly Bureau of MOFCOM.
3. UT and Goodrich shall fulfill the obligation according to the law before the completion of the divestiture.
4. UT and Goodrich have the obligation to offer reasonable technical support to the purchaser according to the requirement of purchaser within one year after divestiture.
5. The business operators shall appoint a superintendent to monitor and supervise the fulfillment of these obligations according to the law and regulation of MOFCOM.
From our observance on MOFCOM’s practice in almost four years, it seems that MOFCOM prefers the utilization of “structural remedy approach” to “behavioral remedy approach” in the horizontal concentration. For instance, as of June 30, 2012, there have been 14 conditional approvals issued by MOFCOM, 10 of which belong to concentrations with horizontal overlap. Furthermore, in the total 10 conditional approvals, structural conditions are employed in as many as 8 cases (including the UT/Goodrich deal). Although there is no guideline or provision on the preference of “structural remedies” in horizontal concentrations, the enforcement practice by MOFCOM can reflect this preference in a large degree.