MINISTRY OF COMMERCE PEOPLE'S REPUBLIC OF CHINA
MINISTRY OF COMMERCEMOFCOM Announcement No. 49, 2012 on Approval of Decision made upon Anti-monopoly Review on Concentration of Operators for Purchasing 33.6% Equity of Niuhai Holdings by Wal-Mart with Restrictive Conditions
Issued by: Ministry of Commerce of the People’s Republic of China
Announcement No.: No. 49, 2012
Date of Issue: August 13, 2012
The Ministry of Commerce of the People’s Republic of China (hereinafter referred to as “the Ministry of Commerce”) received an anti-monopoly declaration on concentration of operators from Wal-Mart for purchasing 33.6% equity of Niuhai Holdings Ltd. (hereinafter referred to as “Niuhai Holdings”). Upon examination, the Ministry of Commerce decided to approve this concentration of operators with restrictive conditions. According to Article 30 of the Anti-monopoly Law of the People's Republic of China (hereinafter referred to as the “Anti-monopoly Law”), it is hereby announced as follows:
I. Case-filing and Review Procedures
The Ministry of Commerce received, on December 16, 2011, a declaration on concentration of operators from Wal-Mart for acquisition of 33.6% equity of Niuhai Holdings. Upon review, the Ministry of Commerce held that the declaration documents and materials were not sufficient, and required the declaring party to provide supplementary materials. On February 16, 2012, the Ministry of Commerce confirmed that the supplemented declaration documents and materials complied with the requirements of Article 23 of the Anti-monopoly Law, and thus filed a case on concentration of operators and commenced a preliminary examination.
Upon preliminary examination, the Ministry of Commerce believed that this concentration may have such effects as excluding and restricting competition in China’s B2C online retail market. This case then went through an extended further review. The Ministry of Commerce decided, on March 16, 2012, to further review this concentration. On June 13, 2012, the Ministry of Commerce decided to extend the further review with the consent of the declaring party.
The Ministry of Commerce solicited opinions, in the course of the examination, from relevant government authorities, trade associations and relevant enterprises, learned information on such aspects as the definition of relevant market, industry features and future development, and reviewed the documents and materials submitted by the declaring party on authenticity, completeness and accuracy.
II. Competitive Analysis
According to Article 27 of the Anti-monopoly Law, the Ministry of Commerce carried out a comprehensive assessment of this concentration of operators and made an in-depth analysis of its influence on market competition, concluding that it may have such effects as excluding and restricting competition.
On November 24, 2011, Wal-Mart Stores, Inc. (hereinafter referred to as “Wal-Mart”) and its wholly-owned subsidiary GEC 2 PTE. LTD.(hereinafter referred to as “GEC 2”), entered into Share Purchase Agreement (hereinafter referred to as the “Agreement”) with Niuhai Holdings, its selling shareholder China Ping An Insurance Overseas (Holdings) Limited, American natural person Yu Gang, Australian natural person Liu Junling, the wholly-owned subsidiary of Niuhai Holdings Xingangling Co., Ltd. (hereinafter referred to as “Hong Kong Xingangling”) and its wholly-owned subsidiary Niuhai Information Technology (Shanghai) Co., Ltd. (hereinafter referred to as “Shanghai Niuhai”), and Shanghai Yishiduo Electronic Commerce Co., Ltd. (Yishiduo) and its selling shareholder Shenzhen Ping An Innovation Co., Ltd..
According to the Agreement, Wal-Mart’s shareholding of Niuhai Holdings shall increase to 51.3% from 17.7% through its wholly-owned subsidiary GEC 2. In addition, Niuhai Holdings shall own the online direct marketing business of the online shopping platform of Yishiduo “The Store” (hereinafter referred to as “The Store of Yishiduo”) by means of its wholly-owned subsidiaries Hong Kong Xingangling and Shanghai Niuhai. Wal-Mart will become a controlling shareholder of Niuhai Holdings upon completion of the transaction, and obtain the control over the online direct marketing business of The Store of Yishiduo through Niuhai Holdings.
As a major competitor in global and Chinese supermarket chains industry, Wal-Mart mainly operates physical stores with competitive advantages in procurement, storage, product lines, store network, services, logistics and brands. Cooperating with thousands of suppliers and hundreds of brands partners, The Store of Yishiduo is currently the largest online supermarket in China. It sells ten categories of commodities totaling over 100,000 kinds, including food and beverage, beauty care, kitchen & bath cleaning and electrical appliance, etc.. Businesses of The Store of Yishiduo contain online direct marketing businesses and value-added telecommunication services. Based on the operation scope, model, characteristics, demands and supply substitution of both parties, the Ministry of Commerce believes that B2C E-retail market belongs to relevant commodity market; meanwhile, in view of consumption custom, transportation and tariff etc., the relevant regional market is the Chinese market.
The investigation indicates that the E-retail involves many links like payment, storage, delivery, marketing and network platform, among which logistics and services are major elements restricting the development of E-tailors. Wal-Mart, equipped with sophisticated storage and delivery system, wide channels of supply and recognizable brand awareness in Chinese physical retail market, is capable of stretching its competitive advantages in physical market to the E-retail business of The Store of Yishiduo upon completion of the transaction. The comprehensive effect from the acquisition will substantially level up the competitiveness of the entity after M&A in E-retail industry. As such, an extension survey on the potential value-added telecommunication service market in connection with this case conducted by the Ministry of Commerce showing that, if entity after M&A enters value-added telecommunication service market through The Store of Yishiduo, it can rapidly expand its business in reliance on the comprehensive competitive edges of current physical retail market and E-retail businesses, achieve dominant position in value-added telecommunication service market, and strengthen its control of bargaining power in network platform in substance. As a result, it may eliminate and restrict the competition in value-added telecommunication service market.
III. Negotiation on the additional restrictive conditions
During the examination, the Ministry of Commerce put forward to the declaring party the potential competition problem arising from such concentration. Wal-Mart submitted, on July 3, 2012, to the Ministry of Commerce the final commitment to solve the competition problem. After assessment, the Ministry of Commerce believed that this commitment can decrease the adverse impact that may arise from the concentration.
IV. Review Decision
After examination, the Ministry of Commerce believed that it may eliminate and restrict competition for Wal-Mart to control the online direct marketing business of The Store of Yishiduo through the acquisition of 33.6% equity of Niuhai Holdings by Wal-Mart. According to the commitment made by Wal-Mart, the Ministry of Commerce conditionally approved this acquisition by imposing the following obligations on Wal-Mart:
(a) The acquisition of Shanghai Niuhai is limited to the segment where Shanghai Niuhai uses its own network platform to conduct commodity sales.
(b) Without permit to engage in value-added telecommunication services, Shanghai Niuhai shall not provide network services to other transaction parties through its own network platform.
(c) Upon completion of this transaction, Wal-Mart shall not, through variable interest entity (VIE) arrangements, engaged in value-added telecommunication service business currently operated by Shanghai Yishiduo Electronic Commerce Co., Ltd. (Yishiduo).
The Ministry of Commerce shall be entitled to, by supervising trustee or itself, examine the obligations performance of Wal-Mart. In case that Wal-Mart fails to fulfill the above mentioned obligations appropriately, the Ministry of Commerce shall be entitled to address the situation in accordance with relevant stipulations of Anti-monopoly Law.
This Announcement shall take effect as of the date of issue.
Announcement No.: No. 49, 2012
Date of Issue: August 13, 2012
The Ministry of Commerce of the People’s Republic of China (hereinafter referred to as “the Ministry of Commerce”) received an anti-monopoly declaration on concentration of operators from Wal-Mart for purchasing 33.6% equity of Niuhai Holdings Ltd. (hereinafter referred to as “Niuhai Holdings”). Upon examination, the Ministry of Commerce decided to approve this concentration of operators with restrictive conditions. According to Article 30 of the Anti-monopoly Law of the People's Republic of China (hereinafter referred to as the “Anti-monopoly Law”), it is hereby announced as follows:
I. Case-filing and Review Procedures
The Ministry of Commerce received, on December 16, 2011, a declaration on concentration of operators from Wal-Mart for acquisition of 33.6% equity of Niuhai Holdings. Upon review, the Ministry of Commerce held that the declaration documents and materials were not sufficient, and required the declaring party to provide supplementary materials. On February 16, 2012, the Ministry of Commerce confirmed that the supplemented declaration documents and materials complied with the requirements of Article 23 of the Anti-monopoly Law, and thus filed a case on concentration of operators and commenced a preliminary examination.
Upon preliminary examination, the Ministry of Commerce believed that this concentration may have such effects as excluding and restricting competition in China’s B2C online retail market. This case then went through an extended further review. The Ministry of Commerce decided, on March 16, 2012, to further review this concentration. On June 13, 2012, the Ministry of Commerce decided to extend the further review with the consent of the declaring party.
The Ministry of Commerce solicited opinions, in the course of the examination, from relevant government authorities, trade associations and relevant enterprises, learned information on such aspects as the definition of relevant market, industry features and future development, and reviewed the documents and materials submitted by the declaring party on authenticity, completeness and accuracy.
II. Competitive Analysis
According to Article 27 of the Anti-monopoly Law, the Ministry of Commerce carried out a comprehensive assessment of this concentration of operators and made an in-depth analysis of its influence on market competition, concluding that it may have such effects as excluding and restricting competition.
On November 24, 2011, Wal-Mart Stores, Inc. (hereinafter referred to as “Wal-Mart”) and its wholly-owned subsidiary GEC 2 PTE. LTD.(hereinafter referred to as “GEC 2”), entered into Share Purchase Agreement (hereinafter referred to as the “Agreement”) with Niuhai Holdings, its selling shareholder China Ping An Insurance Overseas (Holdings) Limited, American natural person Yu Gang, Australian natural person Liu Junling, the wholly-owned subsidiary of Niuhai Holdings Xingangling Co., Ltd. (hereinafter referred to as “Hong Kong Xingangling”) and its wholly-owned subsidiary Niuhai Information Technology (Shanghai) Co., Ltd. (hereinafter referred to as “Shanghai Niuhai”), and Shanghai Yishiduo Electronic Commerce Co., Ltd. (Yishiduo) and its selling shareholder Shenzhen Ping An Innovation Co., Ltd..
According to the Agreement, Wal-Mart’s shareholding of Niuhai Holdings shall increase to 51.3% from 17.7% through its wholly-owned subsidiary GEC 2. In addition, Niuhai Holdings shall own the online direct marketing business of the online shopping platform of Yishiduo “The Store” (hereinafter referred to as “The Store of Yishiduo”) by means of its wholly-owned subsidiaries Hong Kong Xingangling and Shanghai Niuhai. Wal-Mart will become a controlling shareholder of Niuhai Holdings upon completion of the transaction, and obtain the control over the online direct marketing business of The Store of Yishiduo through Niuhai Holdings.
As a major competitor in global and Chinese supermarket chains industry, Wal-Mart mainly operates physical stores with competitive advantages in procurement, storage, product lines, store network, services, logistics and brands. Cooperating with thousands of suppliers and hundreds of brands partners, The Store of Yishiduo is currently the largest online supermarket in China. It sells ten categories of commodities totaling over 100,000 kinds, including food and beverage, beauty care, kitchen & bath cleaning and electrical appliance, etc.. Businesses of The Store of Yishiduo contain online direct marketing businesses and value-added telecommunication services. Based on the operation scope, model, characteristics, demands and supply substitution of both parties, the Ministry of Commerce believes that B2C E-retail market belongs to relevant commodity market; meanwhile, in view of consumption custom, transportation and tariff etc., the relevant regional market is the Chinese market.
The investigation indicates that the E-retail involves many links like payment, storage, delivery, marketing and network platform, among which logistics and services are major elements restricting the development of E-tailors. Wal-Mart, equipped with sophisticated storage and delivery system, wide channels of supply and recognizable brand awareness in Chinese physical retail market, is capable of stretching its competitive advantages in physical market to the E-retail business of The Store of Yishiduo upon completion of the transaction. The comprehensive effect from the acquisition will substantially level up the competitiveness of the entity after M&A in E-retail industry. As such, an extension survey on the potential value-added telecommunication service market in connection with this case conducted by the Ministry of Commerce showing that, if entity after M&A enters value-added telecommunication service market through The Store of Yishiduo, it can rapidly expand its business in reliance on the comprehensive competitive edges of current physical retail market and E-retail businesses, achieve dominant position in value-added telecommunication service market, and strengthen its control of bargaining power in network platform in substance. As a result, it may eliminate and restrict the competition in value-added telecommunication service market.
III. Negotiation on the additional restrictive conditions
During the examination, the Ministry of Commerce put forward to the declaring party the potential competition problem arising from such concentration. Wal-Mart submitted, on July 3, 2012, to the Ministry of Commerce the final commitment to solve the competition problem. After assessment, the Ministry of Commerce believed that this commitment can decrease the adverse impact that may arise from the concentration.
IV. Review Decision
After examination, the Ministry of Commerce believed that it may eliminate and restrict competition for Wal-Mart to control the online direct marketing business of The Store of Yishiduo through the acquisition of 33.6% equity of Niuhai Holdings by Wal-Mart. According to the commitment made by Wal-Mart, the Ministry of Commerce conditionally approved this acquisition by imposing the following obligations on Wal-Mart:
(a) The acquisition of Shanghai Niuhai is limited to the segment where Shanghai Niuhai uses its own network platform to conduct commodity sales.
(b) Without permit to engage in value-added telecommunication services, Shanghai Niuhai shall not provide network services to other transaction parties through its own network platform.
(c) Upon completion of this transaction, Wal-Mart shall not, through variable interest entity (VIE) arrangements, engaged in value-added telecommunication service business currently operated by Shanghai Yishiduo Electronic Commerce Co., Ltd. (Yishiduo).
The Ministry of Commerce shall be entitled to, by supervising trustee or itself, examine the obligations performance of Wal-Mart. In case that Wal-Mart fails to fulfill the above mentioned obligations appropriately, the Ministry of Commerce shall be entitled to address the situation in accordance with relevant stipulations of Anti-monopoly Law.
This Announcement shall take effect as of the date of issue.
Ministry of Commerce of the People’s Republic of China
August 13, 2012
(Translated by Huang Lin)
(All information published on this website is authentic in Chinese. English is provided for reference only.)