Competition Currents October 2021 | Greater China & Japan
On Sept. 3, 2021, the State Administration for Market Regulation (SAMR) published 10 exemplary cases of enforcement of China’s Anti-Monopoly Law (AML) in 2020. Two international mergers—one in semiconductor and the other in medical product markets—are listed among the examples of mergers that SAMR approved with restrictive conditions. Both cases were cited as examples of SAMR’s enhanced scrutiny over international mergers based on analysis of their impact on China’s market. A brief recap of the two cases is as follows.
A. Nvidia’s acquisition of Mellanox.
In 2019, Nvidia, a graphics processing unit (GPU) supplier, announced its intention to acquire Mellanox, a leading supplier of Ethernet and Infini band smart interconnect solutions. The US $6.9 billion transaction was approved by U.S. and EU regulators in the same year. In China, after a year-long scrutiny with protracted negotiation between SAMR and Nvidia, SAMR conditionally approved the acquisition on April 16, 2020, with certain restrictive conditions imposed.
In its opinion, SAMR identified each of GPU accelerators in which Nvidia is active, and private network interconnection equipment, Ethernet adapters, and data center servers in which Mellanox is active in the relevant markets. SAMR held that each pair of GPU accelerators/private network interconnection equipment and GPU accelerators/high-speed Ethernet adapters are neighboring markets, and that data center servers and ordinary Ethernet adapters are vertical markets. Following the conglomerate theories of harm and pointing to the complementary nature of the parties’ products, SAMR held that the acquisition would restrict competition in both China and global markets.
B. Danaher’s acquisition of GE Biopharma.
SAMR’s other exemplary case was the conditional approval of Danaher’s acquisition of GE’s biopharma division on Feb. 28, 2020. In this case, the SAMR found that Danaher and GE had an overlap in 25 product markets for medical equipment. Both parties had significant market shares ranging between 10% to 25% in each market, and SAMR found that the transaction would thus result in a notable increase of Herfindahl-Hirschman Index (HHI) in such relevant markets, making entry into such markets difficult due to the technical and financial barriers. Therefore, SAMR concluded that the transaction would restrict competition in 10 particular product markets. Danaher and the combined business were ordered to divest some of the businesses to address monopoly concerns of SAMR. Specifically, the assets, including certain knowhow and trade secrets, of a research project called Project Emily will be sold to a third-party buyer, among other required divestitures.
JFTC launches an investigation into IPO pricing.
The Japan Fair Trade Commission (JFTC) has launched an investigation into the pricing of initial public offerings (IPO), the first investigation of its kind. In Japan, the difference between the offer price and the opening share price has been larger than that in the United States and Europe, resulting in companies raising less money.
The JFTC reportedly sent questionnaires to approximately 100 companies listed on the Japanese stock market, requesting the contents of the negotiation with the underwriting securities companies regarding the determination of the IPO price, level of satisfaction with the offer price, etc. The JFTC also will work with the Financial Services Agency to ascertain the facts and scrutinize whether there are any problems under the Antimonopoly Law or in light of Japan’s competition policy.
Pamela J. Marple, Yuji Ogiwara, Stephen M. Pepper, Gillian Sproul, Hans Urlus, Dawn (Dan) Zhang, Pietro Missanelli, Anna Rajchert, Mari Arakawa, Filip Drgas, John Gao, Marta Kownacka, Massimiliano Pizzonia, Jose Abel Rivera-Pedroza, Chazz Sutherland, Ippei Suzuki, Rebecca Tracy Rotem and Alan W. Hersh contributed to this article.