Australia’s Example

At the same time, authorities asked Coca-Cola for information about previous mergers and acquisitions in other countries. And in December, the antitrust officials also met with two groups of experts who came to China – one from Australia, another from the United States -- for professional exchanges in December 2008.

One expert was Allan Fels, a former chairman of the Australian Competition and Consumer Commission (ACCC). In November 2003, the commission had rejected a bid from Australia’s Coca-Cola Amatil to buy Berri, the country’s largest juice producer, on the grounds that carbonated soft drinks and juice drinks are complementary, and that a buyout would reduce consumer choice and hurt competition.

ACCC had decided that Coca-Cola might use its dominance in the soft drinks market and other channels to enhance post-merger sales of Berri juices, which is called “conductivity principle”.

Several anti-monopoly experts told Caijing they think the commerce ministry considered ACCC’s experience with Coca-Cola and applied the conductivity principle to its proposal with Huiyuan.

The ministry’s deadline for finishing a preliminary review arrived December 20. But instead of a decision, authorities handed Coca-Cola a notice for further review. Moreover, Huiyuan was asked to provide additional information about its operations, turnovers, profits and market shares.

The takeover plan suffered an even more serious blow a week later when most juice company officials were invited to a ministry hearing on the case. Chinese Beverage Industry Association representatives also attended the hearing, where the company officials said they opposed the deal.  

A top commerce ministry official’s remarks hinted that the proposal was in danger February 9. Lin Zheying, deputy director at the Foreign Investment Administration Department, said that “the long-term impact of the merger and acquisition of the Huiyuan brand remains unknown, and the evaluation of the acquisition must be carried out in light of the healthy development of the entire juice industry.”

Lin also criticized certain media reports about the deal, blaming them for affecting the ministry’s work.

Coca-Cola got a final chance to satisfy the anti-monopoly reviewers in early March, when the ministry announced on its Web site that  negotiated new acquisition terms and asked Coca-Cola to submit a revised plan.