China likely to block BHP Rio JV

Reuters quoted Chinese lawyers and officials said the detention this month of four Rio Tinto employees in China in the midst of bruising iron ore prices negotiations, could be just a sign of things to come as BHP Billiton and Rio seek regulatory clearance for their iron ore joint venture. Mr Michael Komesaroff a consultant on Chinese industry at Urandaline Investments in Australia referring to the detention of four Rio employees said "If the government is prepared to use security services in support of its own companies, then we cannot preclude that they will use the laws on their books to block the joint venture." Mr Mei Xinyu researcher at the Chinese Academy of International Trade and Economic Cooperation, under the Ministry of Commerce said foreigners ignore China's will to use its clout at their peril. He said that “An Australian official said that he was not sure if it would pass in Europe and the United States. He did not mention China. I think after this July, he would think about China too. Mr Mei said "If they don't accept China's authority, for example, that could hurt their sales in China. They could be hit with a proportional fine on sales, adding that a halt in imports would be "the most extreme case." The untested state of China's anti monopoly law means that lawyers and officials may be somewhat relieved if the EU regulator fails to approve the joint venture, removing the need for China to wield its new weapon. Mr Dong Zhengwei a lawyer with Beijing Zhongyin Law Office, and the first person to launch private lawsuits against monopoly practices by Chinese entities said "The situation isn't ideal. From a legal point of view, there are grounds to use the law, but it seems that China's law enforcement bodies haven't yet prepared any sort of measures to use against monopolistic practices beyond its borders." Mr Wang Xiaoye director of the economic law office of the China Academy of Sciences, referring to concerns that the untested anti monopoly law may not be up to the task and that China's regulators lack experience said the two companies must not underestimate China's clout on the international market. BHP and Rio argue that the production joint venture will allow them to mine and transport ore more efficiently. They propose keeping their marketing arms separate in an attempt to assuage European regulators' concerns. The likelihood that European regulators would not sign off last year scuttled BHP's attempt to take over all of Rio Tinto. But in China, the question of monopoly has a personal edge. (Sourced from Reuters)