2018, Volume 50, Issue 1, pp. 159 -226
Abstract: Common ownership by the Chinese State recently caused a stir in Europe. During its review of a joint venture involving a Chinese nuclear power company, the European Commission (“Commission”) held that it would treat all Chinese state-owned enterprises (SOEs) in the energy sector as a single entity. This decision carries significant legal and practical implications for both businesses and the regulator. It also contradicts the Commission’s previous approach to European SOEs. In this Article, I argue that the legal framework under the E.U. Merger Regulation (EUMR) is unsuited to deal with the anticompetitive effects of state ownership. While the delineation of the boundary of an undertaking is a prerequisite for merger review, ownership and control are not absolute. Importantly, the extent to which the coordination by the Chinese State has lessened competition is a quantitative question rather than a qualitative one. Consequently, a bright-line approach to defining an undertaking is both over and underinclusive. To address the European Union’s dilemma in handling Chinese SOEs, I propose that the Commission should view national security review as a complement to its merger review. The optimal regulatory response to Chinese acquisitions hinges not only on economics but also, perhaps more importantly, on politics.