The Ministry of Commence of the People’s Republic of China (MOFCOM) has received an application from Coca-Cola Corporation (Coca-Cola) and China Huiyuan Fruit Juice Group Limited (Huiyuan) for Anti-monopoly review on concentration of business operators and, according to Article 30 of the Anti-monopoly Law (the Law), hereby makes this announcement as follows:
I. Acceptance and Examination of Application
On 18 September 2008, Coca-Cola submitted an application and the related materials to MOFCOM. Coca-Cola supplemented a few application materials according to request of MOFCOM on 25 September, 9 October, 16 October and 19 November respectively. On 20 November, MOFCOM considered that the notification documents had met the standards provided in Article 23 of the Law and decided to accept the application for Anti-monopoly review on the deal with a notice sent to Coca-Cola. Because of the large scale and high complexity of the concentration involved in this case, as of 20 December 2008, MOFCOM decided to conduct a further examination upon completion of the initial examination, about which a written notice was sent to Coca-Cola. During the further examinations, MOFCOM assessed the various impact that would be caused by the concentration. On 20 March 2009, MOFCOM finished the review.
II. Content of Review
According to Article 27 of the Law, MOFCOM conducted comprehensive examinations on the concentration of business operators in this case from the following aspects:
(1) The market share and control power of the business operators participating in the concentration in the relevant market
(2) The degree of concentration of the relevant market
(3) The influence of the concentration of business operators on the market entry and technology advancement
(4) The influence of the concentration of business operators on the consumers and other related business operators
(5) The influence of the concentration of business operators on the development of national economy
(6) The influence of Huiyuan brand on the competition in the market of fruit juice drinks
III. Anti-monopoly Examination
Upon acceptance of the application, MOFCOM duly conducted an examination through careful verification of the application documents; did thorough analysis on the important issues involved; and solicited opinions from the relevant government departments, industry associations, enterprises of fruit juice drinks, up-stream suppliers of concentrated juice and down-stream distributors of fruit juice drinks, two parties of the concentration deal, Chinese partner of Coca-Cola and experts of law, economy and agriculture by means of written invitation for comments, demonstration meeting, seminar, hearing, onsite investigation, entrusted investigation and meetings with participating parties, etc.
IV. Competition Assessment
After the examinations, MOFCOM made an overall assessment on the concentration case and confirmed that the concentration would cause the following adverse influences:
(1) After the concentration, Coca-Cola will have the ability to spread its dominant position in the market of carbonated soft drinks to the market of fruit juice drinks, therefore it will result in elimination and restraint of competition with existing fruit juice drinks enterprises and further damage the lawful interests and rights of the consumers.
(2) Since the brand of drinks is the key factor of effective market competition, after the concentration, Coca-Cola’s control power in the market of fruit juice drinks will be distinctively enhanced by its control of two famous brand names of fruit juice drinks Mei Zhi Yuan (美汁源) and Huiyuan (汇源). Additionally, in light of the current dominant position of Coca-Cola in the market of carbonated soft drinks and its conducting effect [to the market of fruit juice drinks], the concentration will obviously build up the obstacles for potential competitors to enter the market of fruit juice drinks.
(3) The concentration will squeeze the business opportunities for domestic middle and small sized fruit juice drink enterprises and restrain the capability of domestic enterprises in their participation of competition and independent innovation. As such, adverse impact will be caused on the effective competition structure in the Chinese market of fruit juice drinks which unfavorably affect the healthy development of the fruit juice drink industry in China.
V. Negotiations on Restrictive Conditions
In order to reduce the unfavorable impact discovered in the examination, MOFCOM negotiated with Coca-Cola regarding restrictive conditions to be attached to the deal. During the negotiation, MOFCOM requested Coca-Cola submit a feasible solution to the problems discovered in the examination. Coca-Cola stated its opinions on the questions raised by MOFCOM and proposed a preliminary solution plan and its amendments. After evaluation of the plan, MOFCOM held the view that the plan proposed by Coca-Cola concerning remedy to the impact on competition cannot effectively remove the adverse influences created by the concentration.
VI. Decision of Review
In consideration of the above reasons, according to Article 28 and 29 of the Law, MOFCOM considers that the concentration of business operators in this case has the effect of eliminating and restraining the competition and will have an adverse impact on the effective competition in the market of fruit juice drinks and the healthy development of the industry of fruit juice drinks in China. Further, the business operators participating in the concentration failed to provide sufficient evidence supporting that the favorable influences caused by the concentration are obviously greater than its unfavorable influences or the concentration is in line with the public policy. In addition, Coca-Cola did not offer any feasible plan as a solution for reducing the adverse influences within the requested time limit. Therefore, the concentration of business operators in this case shall be prohibited.
This decision shall become effective on the date of announcement.
Ministry of Commerce of the People’s Republic of China
18 March 2009