China could interfere with Vole takeover of Yahoo

AS IF THE VOLE didn’t already have enough trouble trying to swallow up Yahoo, it may now also have to contend with new Chinese antimonopoly regulations.

On Aug 1^st a law, formally ratified by the National People’s Congress last year, will extend China’s economic influence to unprecedented levels. As well as bolstering China’s local antitrust regulation, the legislation will also transform China into a massive regulatory power matching that of the US and Europe. It likewise gives China the right to scrutinize any mergers, foreign or local, that involve the acquisitions of Chinese businesses, which would include Yahoo, who bought 40 per cent of the Chinese e-commerce site, Alibaba.com, in 2005 for $1 billion. This would theoretically give the superpower the right to demand a review of the Vole’s acquisition.

The world will certainly be watching closely to see whether China chooses to correspond the new law with foreign antitrust legislation or use it aggressively as a weapon against international commerce.

Approximately 230 million people in China use the Internet, which accounts for 7 per cent of the country’s gross domestic product. This figure is expected to rise to 15 per cent in about 3-4 years.

The bad news for the Vole is that even if the Chinese decided not to intervene with its plans and attempt to prevent a Yahoo takeover, even just a prolonged review by Beijing could significantly damage the value of the deal. µ

L’Inq
New York Times