MOFCOM Conditional Clearance of United Technologies - Goodrich Merger
On Friday, 15 June 2012, the Ministry of Commerce of China (MOFCOM) conditionally cleared United Technologies (UTC)’s $16.5 billion acquisition of Goodrich, which is the 7th decision published in the last 8 months (A total of 15 merger review decisions were published since 2008). Attached please find a bilingual version of the UTC – Goodrich decision prepared by Zhong Lun antitrust and competition team for your reference.
Below are some highlights:
Bucking the trend shown in prior global merger clearance cases (where PRC clearance was the last to be granted), MOFCOM’s decision came out while EU antitrust authority still investigating the case
In market definition and competition assessment, MOFCOM explicitly made reference to bidding practice/results (“…during many instances of invitation for bidding for AC power generation system carried out by aircraft manufacturers from 2007 to 2011, UTC won most of the market opportunities, Goodrich was one of the few aircraft AC power generation system suppliers that won such bids…”)
While acknowledging the possibility of potential entry, MOFCOM determined that entry barriers are relatively high due to high entry costs and “limited and uncontrollable market opportunities”. (Note: MOFCOM’s Merger Competitive Impact Assessment Rules provides that entry should assessed in terms of likelihood, timeliness and sufficiency)
CR2 (84%), HHI (7158) and delta value (1728) were used to indicate very high level of market concentration (Note: The amended MOFCOM merger notification form, effective 7 July 2012, requires the use of CRn/HHI analysis, unless reasonable grounds for exemption can be provided.