13 January 2015

Case study: Food for thought

The brief

Following a successful acquisition of a 60% stake in Yinlu Foods Group, a leading Chinese manufacturer of peanut milk and canned porridge productions, Nestlé looked to acquire a 60% stake in Hsu Fu Chi, a leading manufacturer and distributor of confectionary in China. Generally speaking, this type of acquisition will trigger anti-monopoly concerns by MOFCOM given that both companies operate in the food sector.

Big picture

China’s competition regime is more complex than the corresponding European or American regimes. MOFCOM takes into consideration non-competition factors, such as industrial policy and national security, in addition to competition issues when considering a merger. This can lead to a variable approach and different outcomes.  Moreover, the Chinese Anti-Monopoly Law (AML) system is relatively young and therefore involves a lot of uncertainties in practice.

AQ in action

  • We took a proactive role in assisting and counselling the Chinese government in the enactment of the Anti-Monopoly Law. Through that process, the team has built and maintained close working relationships with relevant government and judicial authorities in China, including MOFCOM.
  • Despite the potential overlap in the businesses of Nestlé and Hsu Fu Chi, King & Wood Mallesons was able to convince MOFCOM that the transaction would not eliminate or restrict competition in the Chinese market. As a consequence, MOFCOM unconditionally cleared the acquisition. 
  • Our close working relationships with MOFCOM facilitated this process, enabling us to quickly respond to concerns raised and ensuring a positive outcome in a short timeframe. 
  • Having strong experience in Chinese antitrust and competition law enabled us to skilfully navigate complexities and uncertainties, identifying potential pitfalls at an early stage, and achieving the best possible outcome for the client.

Value delivered

China is increasingly attracting foreign investment. King & Wood Mallesons' close working relationships with the regulators and its strong experience in antitrust and competition law means it is best placed to facilitate a smooth entry into the Chinese market.

Both Nestlé transactions required regular communication with MOFCOM in order to explain the transactions and persuade the officials that they would not lead to an elimination or restriction of competition in the Chinese market. We ensured this happened, and communication lines were open between all parties.

A Guide to Doing Business in China

We explore the key issues being considered by clients looking to unlock investment opportunities in the People’s Republic of China.

Doing Business in China
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