China denies protectionism in Coke veto

TRADE WARS

China's Huiyuan criticises blocked Coke deal
China's Huiyuan Juice Group said a merger with US soft-drink giant Coca-Cola could have encouraged competition and benefited consumers, after Beijing blocked a deal citing monopoly concerns. The commerce ministry Wednesday vetoed the 2.4-billion-dollar acquisition of Huiyuan. It said the deal would have had "a negative influence on competition" and consumers would have been forced to "accept higher prices and a smaller choice of products." However, Huiyuan insisted the merger, which would have been the biggest foreign takeover of a Chinese firm, could have brought benefits to the market and China's agriculture and beverage sectors. "An expanding industry will definitely attract more market participants and result in higher sales revenue," the company said in a statement on Wednesday.

"All these in turn help promote healthy competition in the market, and ultimately customers will benefit from more choices." The Chinese juice company declined to comment further on Thursday. Coca-Cola's proposed takeover of Huiyuan was seen as the first major test of China's new competition act introduced last year -- a law hailed as a new "economic constitution" for the country as it transforms from a government-run economy into a free market. A foreign ministry spokesman on Thursday denied protectionism was at work. "The Chinese government's rejection of Coca-Cola buying Huiyuan is an objective judgement based on the anti-monopoly law. It's not trade protectionism," spokesman Qin Gang told reporters.

"The decision was to maintain fair competition in the Chinese market." But nationalistic public opposition to the deal appeared to have overshadowed anti-monopoly considerations, experts said. "The competition law is meant to ensure a level playing field to the benefit of consumers, who should ultimately pay less for higher quality," said Francois Renard, a Beijing-based antitrust specialist with British law firm Allen & Overy. "While I can understand the public reaction to some extent... it is not clear how the same public will actually benefit from the prohibition of the deal." Huiyuan, virtually unknown abroad but a household name in China, controls about 40 percent of the market for pure fruit juices, which is one reason why the deal attracted huge attention when announced last year. "It is unproven that protecting national champions -- if it is really the case here -- benefits consumers," Renard said. Opponents of the deal included rival drinks makers, whom state media reported had appealed to the commerce ministry to stop the deal.

Their counter-proposals had ranged from breaking up Huiyuan and selling it to different Chinese firms, to allowing Coke to buy the company but not the brand name, the Beijing Morning Post reported last year. "Chinese industrial policy and the views of third parties are driving the regulatory process rather than pure competition considerations," said Martyn Huckerby, a Shanghai-based partner at Australian firm Mallesons Stephen Jaques. Drumming up public support may play a bigger role in future deals, he said. "The Ministry of Commerce is being heavily influenced by the public reaction to proposed transactions as well as third-party submissions," Huckerby said. Huiyuan shares plunged 42.17 percent in Hong Kong Thursday afternoon to 3.50 Hong Kong dollars (45 cents), less than a third of the 12.20 Hong Kong dollars the US beverage giant offered per share.

by Staff Writers
Shanghai (AFP) March 19, 2009
China denied trade protectionism Thursday after vetoing Coca-Cola's record takeover bid for Chinese drinks-maker Huiyuan Juice Group, as both companies expressed their frustration.

The government said China was open to foreign investment and defended the commerce ministry's decision to reject the 2.4 billion dollar deal, which would have been the biggest foreign takeover of a Chinese firm.

After initially saying they respected the decision, both the US soft-drinks giant and Huiyuan disputed the ruling that the deal would have had "a negative influence on competition."

"We have been meeting regularly over the recent months to provide independent data to answer (the ministry's) questions. When the (ministry) raised questions we proposed solutions," Coca-Cola said in a statement.

"Despite this (the ministry) has decided not to approve our application."

The government, which called off the deal under a new anti-monopoly law, said a merger would have forced consumers to "accept higher prices and a smaller choice of products."

However, Huiyuan insisted the takeover could have brought benefits to the market and China's agriculture and beverage sectors.

"An expanding industry will definitely attract more market participants and result in higher sales revenue," the company said in a statement late Wednesday.

"All these in turn help promote healthy competition in the market, and ultimately customers will benefit from more choices."

Coca-Cola's proposed takeover of Huiyuan was seen as the first major test of the competition law introduced last year and hailed as a new "economic constitution" as China transforms from a government-run economy to a free market.

A foreign ministry spokesman on Thursday denied protectionism was at work, calling the decision an "objective judgement" aimed at maintaining fair competition.

"The Chinese government's rejection of Coca-Cola buying Huiyuan is an objective judgement based on the anti-monopoly law. It's not trade protectionism," spokesman Qin Gang told reporters.

"The decision was to maintain fair competition in the Chinese market."

Experts said nationalist public opposition appeared to have overshadowed anti-monopoly considerations.

"The competition law is meant to ensure a level playing field to the benefit of consumers, who should ultimately pay less for higher quality," said Francois Renard, a Beijing-based antitrust specialist with British law firm Allen & Overy.

"While I can understand the public reaction to some extent... it is not clear how the same public will actually benefit from the prohibition of the deal."

Huiyuan, virtually unknown abroad but a household name in China, controls about 40 percent of the market for pure fruit juices, which is one reason why the deal attracted huge attention when announced last year.

"It is unproven that protecting national champions -- if it is really the case here -- benefits consumers," Renard said.

Opponents of the deal included rival drinks-makers, whom state media reported had appealed to the commerce ministry to stop the deal.

"Chinese industrial policy and the views of third parties are driving the regulatory process rather than pure competition considerations," said Martyn Huckerby, a Shanghai-based partner at Australian firm Mallesons Stephen Jaques.

Drumming up public support may play a bigger role in future deals, he said.

"The Ministry of Commerce is being heavily influenced by the public reaction to proposed transactions as well as third-party submissions," Huckerby said.

Huiyuan shares plunged 42.17 percent in Hong Kong Thursday to 3.50 Hong Kong dollars (45 cents), less than a third of the 12.20 Hong Kong dollars the US beverage giant offered per share.

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TRADE WARS

China cans Coca-Cola bid for juice-maker

Beijing (AFP) March 18, 2009
China said Wednesday it had rejected a bid by US soft-drink giant Coca-Cola to acquire the nation's top juice-maker, scuttling what would have been the biggest foreign takeover of a Chinese firm.

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