Michael Han ()
When Michael Han, the head of the China antitrust practice for Freshfields Bruckhaus Deringer, announced last month he was leaving for Chinese firm Fangda Partners, many in the legal community expressed surprise that a rising young partner leading a key practice area for a Magic Circle firm would make such a move.
But though Han, who was a Chinese government official before moving to international law practice, himself declined to comment, many of his peers in the Chinese antitrust arena say his move made a certain sense, given how the practice was developing. They think other Chinese antitrust lawyers currently working at international firms may follow suit and move to domestic firms as well.
“It’s a bigger platform there for Chinese lawyers,” says one Chinese antitrust lawyer with another U.K. firm, who requested anonymity because he was not speaking for his firm. At international firms like his, the senior figures in antitrust tend to be those with years of experience practicing European Union competition law, usually in Brussels. Han’s replacement at Freshfields is slated to be Hong Kong partner Ninette Dodoo, who relocated to Beijing from Brussels with Clifford Chance in 2009 and moved to her current firm in October.
Other Brussels veterans now heading up China antitrust practices include Linklaters Hong Kong partner Clara Ingen-Housz, Hogan Lovells Beijing partner Adrian Emch, Allen & Overy Beijing counsel François Renard and Norton Rose Fulbright Hong Kong partner Marc Waha.
The Brussels-centric approach made eminent sense at first, as China’s 2008 Antimonopoly law was substantially based on European Union competition law. But now many lawyers at both international and local firms say China’s antitrust enforcement has evolved in a different direction over the past six years, making E.U. experience less relevant.
“Chinese regulators have developed unique characteristics in merger reviews especially with behavioral remedies,” says John Ren, managing partner of Beijing law firm T&D Associates. “American and European regulators now have to learn from [China's Ministry of Commerce].”
While other bodies are charged with investigating price-fixing and other anticompetitive behaviors, MOFCOM is responsible for Chinese government approvals of mergers and acquisitions. Most of those which come up for review are between foreign companies that happen to do some business in China; though MOFCOM has not blocked any of these primarily overseas mergers, it has been fairly aggressive in conditioning its approvals on ongoing restriction to the combining companies’ operations in China. These are the so-called behavioral remedies to which Ren refers. For instance, when Western Digital Corp. acquired Hitachi Ltd.’s global storage division, Viviti Technologies Ltd., for $4.8 billion in 2012, MOFCOM required Western Digital to maintain Viviti as an independent competitor in China as a condition of approving the merger. Western regulators usually prefer more immediate remedies like divestment.
Fay Zhou, a Beijing antitrust partner with Linklaters, says some measures imposed by MOFCOM suggest that, more so than its Western counterparts, the Chinese regulator also takes into account government industrial policy in certain sectors. Many experts noted last year that China took a very long time to sign off on Japanese trading company Marubeni Corp’s $5.6 billion acquisition of U.S. grain trader Gavilon Corp. as well as the $30 billion merger that created mining giant Glencore Xstrata, suggesting a great wariness over deals involving commodities and natural resources. MOFCOM put conditions on both deals, requiring Glencore to sell a Peruvian copper mine to a Chinese state-owned enterprise.
Hogan Lovells’ Emch also says Chinese antitrust law is diverging from its European model, and he thinks the number of lawyers coming over from Brussels has slowed as a result. “There are fewer and fewer European lawyers these days,” he says. “At first, many thought the law would develop the same way as the EU, but China has developed its own characteristics. … European lawyers used to have advantages, but Chinese lawyers are catching up very quickly.”
One major advantage the European lawyers still have is that they are part of global groups often steering M&A deals through myriad approvals.
Janet Hui, head of antitrust at Beijing’s Jun He Law Offices, says Chinese firms can’t match that kind of global reach. “For large transactions, clients tend to find a firm strong at both antitrust and M&A and have everything done at one firm,” she says, noting that Jun He often receives referrals for antitrust work from international firms. “Firms like Linklaters or Freshfields get deals because they can handle both M&A and filings in multiple jurisdictions.”
The other main advantages European lawyers have relate to experience. The Chinese antitrust lawyer with the U.K. firm says the practice in China is not solely about understanding the domestic statute and bureaucracy. “You have to understand the principles of competition law and be able to conduct competition analysis,” he says. “Chinese lawyers don’t have these advantages because our entire concept of antitrust was imported.”
Allen & Overy’s Renard says European lawyers who have worked in China for many years can bring an especially valuable perspective to clients. “With sufficient and long-standing experience in both Europe and China, we are able to explain to international companies how the China antitrust law is enforced, how it compares to the enforcement of antitrust rules in foreign jurisdictions, especially in Europe, and how the enforcement may impact their global business,” he says. “Chinese antitrust law has indeed developed its own characteristics and, if you are a European lawyer just entering China now, it would be much harder to bring immediately such added value.”
But, given their experience, a major frustration for foreign antitrust lawyers in China has been MOFCOM’s broad refusal to work with them. Though foreign lawyers are prohibited from practicing Chinese law, a loophole for advising on China’s “legal environment” has meant that international firms can do most things short of appearing in court. But MOFCOM has been fairly strict in refusing to even meet with foreign lawyers on merger reviews. Chinese lawyers must be retained for such meetings, as well as submit filings to the Ministry of Commerce.
Ren thinks Chinese firms’ relatively exclusive dealings with MOFCOM have now given them an experience edge over foreign lawyers. “Local firms are playing more and more important roles in handling high-profile antitrust cases,” he says. “[Clients] want to know if you can convince MOFCOM to remove a condition, or if you can talk them into changing the conditions to more acceptable ones. These negotiations have to be handled by local counsel.”
T&D, which last year advised Microsoft Corp. on Chinese antitrust approval of its acquisition of Nokia Corp., is one of four Chinese firms perceived as leading the market in antitrust matters, the others being King & Wood Mallesons, Jun He Law Offices and Broad & Bright. Beijing-based Gaopeng & Partners and Zhong Lun Law Firm are also well regarded. Fangda has not been a major player in antitrust to date, and its recruitment of Han is widely seen as a move to change that.
Antitrust lawyers from three international firms agree that there are only a handful of firms they repeatedly refer work to. “If the filing is simple and we only need a Chinese firm as a messenger, we would probably go to anyone,” says the Chinese lawyer with the U.K. firm, “but when matters get complicated, we will only turn to the top four firms.”
Hui doesn’t see how other firms can compete. “Clients want to see what you have done,” she says. “MOFOCM announces all filings on their website, and clients will ask us which are the ones we did. They want specialized lawyers working on deals on a regular basis, not those who do three to five deals a year.”
Earlier this year, Hui helped U.S. life sciences company Thermo Fisher Scientific Inc. gain MOFCOM approval for its $13.6 billion acquisition of Life Technologies Corp. Last month, Jun He also represented Rolls-Royce on Chinese approval of its $3.8 billion buyout of joint venture partner Daimler A.G.’s stake in Rolls-Royce Power Systems.
There is some thought that the competition among competition lawyers might heat up as investigations and enforcement actions, as opposed to merger filings, become a bigger part of China antitrust practice. China’s National Development and Resources Commission and State Administration for Industry and Commerce have raised their profile over the last year by targeting alleged price-fixing behavior in several industries, notably pharmaceuticals and telecommunications.
Hui thinks the same firms will lead in investigations as well. “Of 10 companies being targeted in an investigation, eight of them came to me,” she says. “We can only pick one. The other companies are asking, ‘Where are we supposed to find another Chinese firm?’” Hui says her firm is involved in most of the highest-profile investigations but declined to name clients. T&D is currently representing Swedish packaging maker Tetra Pak in an SAIC investigation and has previously represented Samsung Electronics Co. Ltd. and Nestlé S.A. in NDRC probes.
International firms also see new opportunity in investigations. The Chinese antitrust lawyer with the U.K. firm says that, unlike MOFCOM, NDRC and SAIC have so far been willing to deal with foreign antitrust counsel. “Foreign firms are allowed to answer questions on behalf of clients and work out correction plans,” he says. “Clients have the choice, but it’s not necessary to engage Chinese counsel throughout the process.”
Broad & Bright antitrust partner Feng Yao, who is currently representing U.S. wireless technology developer InterDigital Inc. in an NDRC investigation, thinks there will be plenty of work to go around.
“The investigations are the emerging market now,” she says. “Everyone wants a piece of it. But it’s just getting started. There will be more investigations. I think the market will be big enough for both Chinese and international firms to find a place.”