China Prepares to Flex Anti-Trust Muscles

31 March 2008

BEIJING: Chinese antitrust authorities could scupper Microsoft's attempts to buy Yahoo after beefed-up versions of existing competition regulations come into effect on August 1 this year.

The new rules will make China a third regulatory sphere of influence, after the USA and the European  Union, giving it powers to examine foreign mergers when they involve acquisitions of Chinese companies or foreign businesses investing in Chinese companies' operations.

Struggling online giant Yahoo has a 39% stake in,China's biggest ecommerce business. A successful bid by Microsoft would trigger a buyback provision, enabling the Chinese firm to gain independence from the software titan.

It is unclear whether Beijing would flex its regulatory muscle over the deal, but industry analysts believe a prolonged review could affect the value of the business.

Beijing-based lawyer Nathan Bush warns: "Multinational corporations will need to develop strategies for all the markets they operate in, and China is a big market."

Chinese authorities are sharply aware of the influence the internet has on their internal political and economic affairs, and on their dealings with the rest of the world, as witnessed by the recent violent protests in Tibet.

Last week, vice minister Cai Mingzhao, from the State Council Information Office, said there were 230 million Chinese web users. The internet accounted for seven percent of the country's GDP, and he expected that to rise to 15% in three to four years

He also warned that foreigners should not use the internet to interfere in Chinese internal matters.

Data sourced from International Herald Tribune; additional content by WARC staff