China Approves Google’s Motorola Buy 中国批准谷歌收购摩托罗拉

By newsdoug on May 21, 2012

I have to admit that perhaps I was wrong in my initial skepticism about Beijing’s motivations in repeatedly delaying approval for Google’s (Nasdaq: GOOG) purchase of Motorola Mobility (NYSE: MMI), speculating that its foot-dragging might have been motivated by political factors. (previous post) But now that the anti-monopoly regulator has finally approved the deal, I feel like I should actually congratulate it for addressing an important concern that was probably the real source of the delays, namely the potential that Google might give Motorola phones preferential treatment for its Android smartphone operating system at the expense of other major handset makers who also rely heavily on the popular OS. The long-awaited approval, which was delaying closure of a $12.5 billion deal first announced last August, finally came after Google agreed to conditions required by the Chinese regulator aimed at making sure that Android remains open and free to everyone, and that Google treats all cellphone makers who chose to use the operating system equally. (English article) I’ll be the first to admit that my first reaction to most actions by China’s anti-monopoly regulator is one of skepticism, since it has a history of allowing political considerations into its decisions that are largely unrelated to its main mission of ensuring that major M&A deals don’t harm market competition. The regulator’s bias was on glaring display in 2009, when it vetoed Coca Cola’s (NYSE: KU) plan to buy leading domestic juice maker Huiyuan (HKEx: 1886), citing monopolistic concerns even though most observers believed that Beijing simply didn’t want to see the promising domestic brand swallowed up by a foreign company. The regulator seemed to be changing its ways last year when it approved the purchase of another promising Chinese brand by a foreign name, in this case allowing Yum Brands (NYSE: YUM), operator of the KFC and Pizza Hut chains, to buy Little Sheep, operator of China’s largest hot pot restaurant chain. (previous post) The delays behind this latest approval of Google’s purchase of Motorola look like a smart move to me, aimed at addressing the very real concern by many of Android’s users that they might lose access to the OS if Google gives preferential treatment to Motorola. The major regulators in the US and Europe were unlikely to focus on this particular concern, since most of the major cellphone makers that use Android are based in Asia, such as Taiwan’s HTC (Taipei: 2498) and Korea’s Samsung (Seoul: 005930). A growing number of Android users are also in China, most notably Huawei and ZTE (HKEx: 763; Shenzhen: 000063), which are 2 of the world’s fastest growing players in the smartphone space. Thus the regulator was clearly addressing very real concerns from these and other domestic smartphone makers about becoming second-class Android citizens after a Google-Motorola merger, hence the regulator’s decision to impose its conditions. At the end of the day I’m quite encouraged by this action, and increasingly confident that we’ll see more decisions from the regulator based on market concerns rather than political considerations.

Bottom line: China’s long-delayed approval of Google’s Motorola purchase was due to real anti-competitive concerns, and reflects growing maturity at the Chinese regulator.

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