Anti-trust Issues On M&A Of Domestic Enterprise By Foreign Enterprise

Although M&A is an effective way to improve scale economy, it also can change the market power and may create or strengthen the dominant position in the market thus limit effective competition Therefore it has been a conventional practice to review a certain scale of M&A transactions by antitrust authorities. Since the implementation of China’s anti-monopoly law, merger control is the most active field of the three big pillars and foreign M&A cases are an important part of merger control. Compared with American’s over100years merger control history, China’s anti-monopoly law is still at the primary stage,thus how to strengthen the foreign M&A competition evaluation is an urgent requirement for implementing China’s anti-monopoly law smoothly.Based on the standard Cournot competition model, this paper systematically analyzes competition effects of horizontal M&A and vertical M&A by foreign enterprise. The main conclusions which will give some valuable guidance to the anti-monopoly practice are as follows:First, there are irreconcilable contradictions and conflicts between competition policy and industrial policy when M&A by the new foreign enterprise occurs. As is shown in our model that when the new foreign enterprise merger with the only domestic enterprise,total social welfare and consumer welfare will be increased.. From the perspective of competition policy such M&A should certainly have been approved, but from the industrial policy perspective, the negative impact of this kind of M&A is often considered as the biggest of all. Obviously, the objective of our country’s industrial policy set domestic enterprises total profits as the important part, but not limited to domestic enterprises profits, it seems to also contains the market share accounted for the domestic enterprises. Therefore, from the point of industrial policy objective, M&A by foreign and M&A by domestics are very different. Thus there are the fundamental conflicts between competition policy and industrial policy, which lead to the opposite choice under two kinds of policy. This also is innovation place.Second, in case of vertical M&A by foreign enterprise competition policy is commonly coordinated with industrial policy, this paper firstly analyzes foreign vertical merger’s effect on price and total welfare in absence of efficiency advantage. It is found that although under certain conditions, the merged will implement market foreclosure but price of input and final product are still reduced. Even if expanding to efficiency advantage, we can also draw same conclusion unless efficiency advantage is big enough. This article proves that in case of vertical merger competition policy is coordinated with industrial policy, which can be a useful reference for anti-monopoly enforcement authority This is another innovation of this article.Third, the social total welfare standard maybe more suitable welfare standard of merger control in our country.One is China’s "anti-monopoly law" legislative intent is more close to the standard of total social welfare. Such as article1shows China’s anti-monopoly law has been included in the industrial policy factors, producer surplus, especially the producer surplus of domestic companies, even if it lays emphasis on analysis of the competition, also can never be ignored; article7shows the merger of the state-owned enterprises are likely to give more weight to the enterprise interests and ignore the consumer; article27with particular emphasis on the national economy, this is, of course, related to the present situation of developing countries like China, emphasizes the merger to the national economy suggests that the influence of weight given in producer interests higher welfare standards. From the current level of economic development in our country and our country long-standing industrial policy thinking perspective, the anti-monopoly law in China is more suitable for using the standard of total social welfare.