5 Comments
Apr 3, 2023Liked by Kevin Xu

As an antitrust lawyer, I would have to correct you on the supposed upside from spinning off the different business units from an antitrust perspective.

So long as the holding company continues to have control (decisive influence) over each of the divested business units, they will all be considered part of a single economic 'undertaking'. As a result, the operating companies' presence on various markets would continue to be viewed from a group perspective. E.g. on a market for 'China and SE Asia e-commerce' the market shares of China Commerce and International Commerce would be viewed in aggregate.

Fines are also calculated on the same basis. If any opco of Alibaba is found to have committed an antitrust infringement, the ultimate fine will be calculated as a % of Alibaba group revenue.

Otherwise, thanks for the article!

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author

Thank you for sharing this additional information and knowledge.

Do you, by any chance, know what "control" means or how it is calculated? Is there a percentage of ownership that equates control?

There usually is a % when it comes to consolidating financial statements, e.g. Softbank used to include Alibaba's earnings in its own financial statements, until it sold down shares and reduced its ownership stake to a level where it can no longer do that.

Is there a similar threshold in the antitrust context?

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Apr 4, 2023Liked by Kevin Xu

My understanding is the Chinese antitrust regime follows the EU model when it comes to "control" - which means the question would be whether the combination of control rights (voting rights, board appointment/termination rights, veto rights at board or shareholder level, etc) gives the shareholder the ability to determine the strategic commercial behavior of the entity. The % of the nominal shares held matters, but the rights that the shareholder has over strategic decision-making would likely be the key factor - so in that sense it differs from the accounting/financial reporting concept of control i would imagine.

It'll depend ultimately on the bundle of control rights Alibaba topco reserves to itself in the restructuring. So even if it floats 85% of, say, International Commerce and retains only a 15% stake post-reorg, if those shares carry weighted voting rights, veto rights on all key strategic decisions and a right to appoint/terminate >50% of the board itself, then it would likely retain "control" for antitrust purposes.

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author

Make sense, thank you for sharing this perspective!

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Great stuff. Thanks!

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