Reviewing Cross-Border Mergers and Acquisitions for Competition and National Security: A Comparative Look at How the United States, Europe, and China Separate Security Concerns from Competition Concerns in Reviewing Acquisitions by Foreign Entities

AuthorKevin B. Goldstein
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2011] CROSS-BORDER M&A 217
Kevin B. Goldstein*
This Article takes a comparative look at how governments review cross-border mergers for
both competition and national security concerns. In particular, key factors are the
institutional mechanisms through which these two reviews are separated or combined and
how “national security” is defined in the context of economic activity. The focus is on the
three major economic markets: the U.S., the EU (using the example of the UK a s a member
state), and China, with particular emphasis on China’s rapidly developing system.
In the U.S., antitrust review is wholly separate from the national security review conducted by
the Committee on Foreign Investment in the United States (“CFIUS”). In Europe, large
mergers are notified to the EC Directorate General for Competition, however, individual
Member States may raise national security exceptions within the same competition review
process. Though China has reviewed foreign investment for years, comprehensive
competition review began when the Antimonopoly Law became effective in 2008. Recently,
China’s State Council has implemented an interdepartmental national security review system
for foreign mergers and acquisitions.
This Article examines the existent U.S. and EU systems alongside the emerging Chinese
system of national security review. Examples demonstrate that national security review in
the U.S. has often become politicized, though primarily by the U.S. Congress and not by
CFIUS. Politicized mergers result in uncertainty for businesses and can harm diplomatic
relations with key trading partners. The UK has had success avoiding the pitfalls of
politicized reviews, however, the European system could not be successfully replicated by the
U.S. or China due to their more centralized political systems.
Ultimately, the definition of “national security” will have the greatest impact on which cross-
border mergers receive clearance. Though China has not explicitly defined national
security, concerns about foreign investment relate to military defense, strategic economic
security, and what has been called cultural security. The U.S. and EU have historically
limited their definitions of national security to the defense arena. However, the Foreign
Investment and National Security Act of 2007 significantly broadened the U.S.’s definition to
include many sectors of the economy previously beyond CFIUS’s purview. This new
definition and other changes make U.S. practice more likely to appeal to Chinese lawmakers
and are likely to influence the emerging Chinese national security review committee.
Early merger reviews under the Antimonopoly Law, especially the Coca-Cola and Huiyuan
case, have drawn criticism for apparently allowing factors other than competition to influence
the Ministry of Commerce Antimonopoly Bureau’s decisions. China’s new national security
GOLDSTEIN 215 (DO NOT DELETE) 2011-9-2 2:21 PM
review is likely to have a positive impact on the internal politics that may have influence the
Antimonopoly Bureau. While politicization of merger revie ws is likely to continue in the
future, adopting a CFIUS-type interdepartmental review system can act as a lightning rod,
freeing the Antimonopoly Bureau from pressure to consider non-competition factors. This
will enhance transparency and improve external perceptions by investors and trading
This Article concludes that the CFIUS model, taking account of the great increase in authority
since 2007, is a good fit for China’s political climate. If properly implemented, creation of a
national security review system will provide substantial, though limited, benefits to China.
This paper takes a comparative look at how governments review
cross-border mergers for both competition and national security
concerns. In particular, this paper examines the structural and
institutional mechanisms through which these two reviews are
separated or combined and how “national security” is defined in the
economic context. The focus is on the three major economic
markets: the United States, the European Union (using the example
of the United Kingdom as a Member State), and China.
Over the past decades, global competition law has been marked
by a high degree of convergence in both substantive law and
procedure. Indeed, multilateral institutions such as the International
Competition Network and newly created international affairs offices
of national enforcers have made convergence a top priority.1 While
significant differences still remain, there is remarkable similarity
between the substance and procedure followed by the world’s major
antitrust enforcers.
Leading the efforts toward regulatory convergence have been the
United States (“U.S.”) and the European Union (“EU”) as the
world’s most powerful and influential enforcers. 2 China is a
* Member of the New York Bar; former Visiting Lecturer, Tsinghua University School of Law, 2010;
Tsinghua University School of Law, LL.M. 2010; Georgetown University Law Center, J.D. 2009;
Dartmouth College, A.B. 2005. © 2011, Kevin B. Goldstein. The author thanks Tarrant Mahony for
his many helpful comments on an earlier version of this Article, which received an award for Best
Graduate Thesis at Tsinghua Law in 2010. Additional thanks are due to James Feinerman and Suat
Eng Seah for their guidance on discrete research topics. The views expressed are the author’s alone.
1 See About, INTERNATIONAL COMPETITION NETWORK, (last visited Apr. 11, 2011); see also, e.g.,
About the Office of International Affairs, FEDERAL TRADE COMMISSION,
(last visited May 8, 2011) (“The FTC works with competition and consumer protection agencies around
the world to promote cooperation and convergence toward best practices.”).
2 As an example of U.S. and European leadership, the current Chair and Vice-Chair of the International
Competition Network’s leadership body are, respectively, John Fingleton, Chief Executive of the
U.K.’s Office of Fair Trading, and William Kovacic, one of the five Commissioners of the U.S. Federal
Trade Commission. Steering Group Members, INTERNATIONAL COMPETITION NETWORK, (last visited Apr.
11, 2011).
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newcomer, with its first comprehensive competition law, the
Antimonopoly Law (“AML”), coming into effect in 2008. 3
Following the trend of convergence, China’s AML reflects its
lengthy study of U.S., EU, and other competition enforcement
regimes. It is widely accepted that China, as its economy continues
to expand, will gradually take its place as a major regulator who will
exercise concurrent jurisdiction with the U.S. and EU over nearly all
large transnational mergers. Many expect that securing approval
from the triumvirate of the U.S., EU, and China will be absolutely
essential to completing the most significant deals in the future.
Notwithstanding the large similarities in competition law between
these three economies, there are, of course, notable differences in
how they review mergers. The U.S. and EU have occasionally
reached starkly different conclusions, most notably in the GE-
Honeywell case.4 As the newest to the field, China’s enforcement
practices are still developing and have been the subject of much
speculation in government, business, and academic circles.
Amongst the remaining differences between the enforcers, there
is a particularly notable lack of consensus on how to treat
transnational mergers that raise questions of national security. The
U.S. has a system of parallel merger reviews, using multiple agencies
to keep examination of competition issues separate from national
security review. The EU, lacking a formal unified conception of
“European security,” must defer to the judgment of individual
members states on their own national security. European Union
Member States raise national security objections within the context
of the same European Community (“EC”) review process that is
focused almost entirely on competition concerns.
Alongside the U.S.’s dual processes and the EU’s single process,
China has recently articulated a procedure for national security
review. However, implementing regulations are still developing
and China’s system is yet to issue any decisions. China’s national
security review system may be welcome because there has been
concern that some of the earliest decisions under China’s AML
merger review system have been tainted by protectionism and
3 Fan Longduan Fa (反垄断法) [Anti-Monopoly Law] (promulgated Aug. 30, 2007, effective Aug.
1, 2008) 2007 STANDING COMM. NATL PEOPLES CONG. GAZ. 68 [hereinafter AML], original Chinese
with inline translation by Weil, Gotshal & Manges LLP, available at
4 See generally Eleanor M. Fox, Mergers in Global Markets: GE/Honeywell and the Future of
Merger Control, 23 U. PA. J. INTL ECON. L. 457 (2002); Jeremy Grant & Damien J. Neven, The
Attempted Merger Between General Electric and Honeywell: A Case Study of Transatlantic Conflict, 1
(2005) (U.K.).

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