February 16, 2012 / 9:05 AM / 8 years ago

Chinese Commerce Ministry reviewing Google/Motorola deal

BEIJING (Reuters) - The Chinese Commerce Ministry is reviewing Google Inc’s $12.5 billion purchase of Motorola Mobility Holdings Inc, a ministry spokesman said on Thursday.

A posed picture shows a Motorola Droid phone displaying the Google search page in New York August 15, 2011. REUTERS/Brendan McDermid

The ministry’s Anti-Monopoly Bureau is looking at the deal, spokesman Shen Danyang said at a regular press briefing. The Anti-Monopoly Bureau’s review is a routine part of the acquisition procedure.

“It is still in the process of checking and verification of relevant issues and we will release any news of development in a timely manner,” Shen said.

Under Chinese law, enterprises that run businesses in China and that earn annual revenues of 10 billion yuan ($1.55 billion) globally and 400 million yuan in China must seek government approval for a proposed acquisition.

While Google relocated its search business to Hong Kong in 2010 amid accusations Chinese were hacking into its servers, it maintains other business on the mainland.

Chinese authorities have until March 20 to decide whether to approve the deal or start a third phase of review, according to a source close to the situation.

“We filed in September and are awaiting review,” a Google spokesman said on Thursday in reference to the Chinese review.

While the review is considered a routine step, Chinese regulators could use the Motorola deal to gain leverage over Google for moving its search operations to Hong Kong.

If China does not approve the acquisition, “It will not happen,” said Edward Yu, chief executive of Analysys International, a technology and Internet consultancy in Beijing. “A process is a process.”

However it is extremely unlikely that China would raise such objections, Yu said.

“This year is quite sensitive, with a new lineup of leaders in the central government,” Yu said, referring to the upcoming Communist Party congress where the party leadership will be replaced. “I don’t think there will be anything extreme, warm or cold, or retaliation.”

Instead, Yu said, China’s scrutiny of the deal could allow Google to have a dialogue with Chinese authorities and work out conditions whereby Google would return to doing business in China fully.

“What China is extremely good at is identifying opportunities that can be leveraged as bargaining chips,” said an IT industry analyst in Beijing who spoke on condition of anonymity so as not to antagonize Chinese authorities.

“Chinese companies have been rebuffed in a number of attempts to make acquisitions in the U.S. market,” he said. “Any time China can be in an opposite position and say, ‘You had your concerns and shut it down’...This cuts both ways.”


U.S. and European regulators have approved Google’s purchase of Motorola Mobility and said they would keep a close eye on the web search giant to ensure that patents critical to the telecommunications industry would be licensed at fair prices.

Google, whose Android software is the top operating system for Internet-enabled smartphones, said in August it would buy phonemaker Motorola for its 17,000 patents and 7,500 patent applications.

Google is looking to compete with rivals such as Apple Inc and defend itself and Android phone manufacturers in patent litigation.

The deal would be Google’s largest acquisition and its most significant foray into hardware. Some investors are concerned that Google’s profit margins could suffer if it expands into hardware, although Google has said it intends to run Motorola as a separate business unit.

Antitrust authorities in the United States and Europe want to prevent companies from overcharging rivals when they license patents that ensure different communications devices work together.

The purchase would give Google one of the mobile phone industry’s largest patent libraries, as well as manufacturing operations that will allow Google to develop its own line of smartphones.

Reporting by Zhou Xin; Writing by Terril Yue Jones; Editing by Michael Urquhart and Matt Driskill

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