Anti-monopoly law could derail Microsoft-Yahoo merger

China's anti-monopoly law that takes effect in August might put a damper on Microsoft plans to take over Yahoo.

According to the New York Times, the law will allow authorities to examine foreign mergers that involve Chinese companies or when foreign companies invest in Chinese firms. Xinhua said that regulators could also consider national security issues.

China could influence Microsoft's takeover bid because in 2005, Yahoo made a 1 billion USD (634.8 million euros) investment in Alibaba.com, China's largest e-commerce business, giving it a 40 percent stake in the company.

If a merger between Microsoft and Yahoo goes through, Alibaba officials say it might be possible for them to gain independence from Microsoft through a buyback provision.

When the anti-monopoly law takes effect, China could have as much regulatory power as the European Union and the United States.

"Multinational corporations will need to develop strategies for all the markets they operate in and China is a big market," Nathan G Bush, an antitrust law specialist for O'Melveny & Myers in Beijing was quoted by New York Times as saying.

The world business community is waiting to see how China handles the Microsoft acquisition as an indication of whether China would play a conciliatory or a nationalistic role on the world stage, the New York Times said.

The law will define more companies as monopolies, Bloomberg said, citing its main points:

• Any acquisition that increases a Chinese or foreign company's domestic market share to more than 25 percent will need government approval.

• An acquisition creating a company with more than 9 billion yuan (814.7 million euros) of global sales, with at least one company having more than 300 million yuan (27.16 million euros) of revenue in China must get government approval.

• Mergers creating companies with more than 1.7 billion yuan (153.9 million euros) of annual sales in China will also be reviewed by the Anti-Monopoly Enforcement Authority.

The law has been criticized by the EU and US business groups and trade officials, Bloomberg said, because it could potentially dissuade foreign companies from buying Chinese enterprises. The law requires a national security check for all foreign purchases of Chinese companies as well as a competitiveness review.

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