The Single Entity Theory: An Antitrust Time-Bomb for Chinese State-Owned Enterprises?
Journal of Competition Law and Economics, Volume 8, Issue 4, 805-830 (2012)
21 Pages Posted: 5 Apr 2012 Last revised: 2 Dec 2013
Date Written: December 5, 2011
In five recent cases involving the acquisition of European companies by Chinese state-owned enterprises, the European Commission has delved deeply into the relationship between Chinese state-owned enterprises and the wider Chinese State. A common issue arose in these cases: Did the notifying state-owned enterprise operate independently of the Chinese State or was there scope for the Chinese State to coordinate the behaviour of the notifying enterprise and other state-owned enterprises in the same sector? In the latter case, all the SOEs in the same sector would be treated as part of a single entity for the purpose of merger analysis. To provide an in-depth analysis of this issue, this article first reviews the historical development of the reform of state-owned enterprises and examines their current corporate governance structure. By applying the economic theory of the firm to understand the concept of “undertaking” under the EU Merger Regulation, this article reveals the flaws in the European Commission's analysis of this issue. As the single entity theory can be used as both a shield and a sword, the European Commission’s decision on this issue will have far reaching implications for future antitrust cases involving Chinese state-owned enterprises.
Keywords: outbound investment, M&A, SASAC, undertaking, boundary, merger control
JEL Classification: K21, L22, L10, L40, N45
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