Thirteen years in the making, China's eagerly anticipated anti-monopoly law was finally introduced in August 2008.

The law will provide a comprehensive framework to regulate competition and prevent monopolistic behavior.

Despite its somewhat vague language, the unanswered questions as to which authority will be responsible for implementing it, and uncertainty regarding its precise applications, the law has generally been well received. Law firms and observers called it a positive development and a significant step toward aligning China with international best practices and increasing fair competition in the country.

The first deal reviewed under this new law will be Coca-Cola's recent bid for China Huiyuan Juice. The deal is being closely watched by the M&A community and will give a clearer idea of how the new law will be implemented.

In early September, Coca-Cola made a $2.3 billion offer to buy China Huiyuan Juice. According to sources involved in the process, the key to a speedy deal approval will be the definition of the market most affected by the deal and the submission of comprehensive documentation detailing the likely impact on competition.

It will be important to determine, for example, whether the whole beverage market will be affected or just the juice and cola segments. A legal source said that whether we take pure juice or cola separately, or an overview of both markets, Coca-Cola's acquisition of Huiyuan will generate monopoly concerns. However, in the context of the entire soft beverage market, monopoly concerns would be significantly diluted.

As to documentation, a legal source suggested that the notifying party should work with experienced lawyers to submit the necessary documentation. Providing all of the information in a clear and concise form will not only help in forming a rational definition of the relevant market but should also decrease the time taken for the Ministry of Commerce (MOCOM) to reach a decision.

Coca-Cola's legal adviser is Skadden, Arps, Slate, Meagher & Flom while Huiyuan has appointed Freshfields Bruckhaus Deringer.

Clause No 23 of the Anti-Monopoly Law, the source explained, instructs the notifying party to submit five documents, among them a report on the competition situation of the relevant market which will be extremely important in determining the outcome of the review. For example, if the relevant market defined in the report is too large, the report could delay the MOCOM review considerably, the lawyer said. Conversely, if the market outlined is too small, the MOCOM could block the deal due to monopoly concerns.

An MOCOM official said that the market competition report should be as detailed and carefully measured as possible; it should include an analysis of barriers to market entry and a breakdown of market share. A second official agreed that the more detailed and complete the report, the better.

"The MOCOM often asks for supplementary documentation because the report is not detailed enough," the official said. A Shanghai-based lawyer experienced in antitrust notification said supplementary documentation requests by the MOCOM were the main reason most antitrust reviews dragged on.

Given the early stages of the new law, the rules, guidelines and processes associated with it are truly a work in progress. Its impact on Chinese M&A activity cannot be fully estimated yet. All eyes are on Coca Cola, it seems, in the hope of gleaning some insight into the future application of this important legal development.

The author is an editor of mergermarket Asia-Pacific.

(HK Edition 10/07/2008 page3)