The Ministry of Commerce of the People’s Republic of China (“MOFCOM”) has issued the Announcement of the Anti-monopoly Examination Decision on the Conditional Approval for the establishment of Joint Venture between General Electric (China) Ltd. and China Shenhua Coal to Liquid and Chemical Co., Ltd. (the “Announcement”) on 10 November 2011. This is the ninth conditional clearance decision since the introduction of the Anti-monopoly Law of the People’s Republic of China (the “AML”).
According to the Announcement, General Electric (China) Ltd. (“GE China”) and China Shenhua Coal to Liquid and Chemical Co., Ltd. (“CSCLC”) submitted the notification for the establishment of Joint Venture (the “Transaction”) on 13 April 2011. MOFCOM officially accepted the case and started the antitrust review on 16 May and decided to further examine it on 15 June. MOFCOM made a decision to further extend the examination period on 13 September and finally decided to conditionally approve it on 10 November.
In the Announcement, MOFCOM defined the relevant market of the Transaction as “the China market for licensing coal water slurry gasification technologies.” This market is highly concentrated with only three major players – coal water slurry gasification technology provided by GE Infrastructure Technology, multi-nozzle-mounted coal water slurry gasification technology jointly developed by Yankuang Group and East China University of Science and Technology, and multi-component slurry gasification technology provided by the Northwest Research Institute of Chemical Industry. The coal water slurry gasification technology provided by GE Infrastructure Technology has the highest market share among the three competing products. The coal water slurry gasification technology has specific requirements for the ash content, ash melting point and water content of the raw coal, and operators of coal water slurry gasification projects are required to have a reliable supply of the raw coal. In 2010, Shenhua Group, the shareholder of CSCLC, was the largest supplier of the raw coal which is suitable for the coal water slurry gasification technology. In addition, from the aspects of business risks, intellectual properties, research and development and industrialization cycles, MOFCOM concluded that it is very difficult to enter the market for licensing coal water slurry gasification technologies.
Based on the above, MOFCOM requested the Joint Venture (the “JV”) established by GE China and CSCLC shall not compel its counterparties to use the JV’s technology or raise the cost of using other technologies by restraining the supply of the raw coal or by supplying the raw coal as conditions.