New Chinese Law could be Hurdle in Microhoo Deal

A new antimonopoly law in China could be the make or break for the proposed purchase of Yahoo! by Microsoft.

The New York Times has reported that the Chinese government is activating this new legislation from August 1 2008 and gives "Chinese regulators authority to examine foreign businesses investing in Chinese companies' operations".

The reason this new law could hurt the Microhoo deal is because Yahoo! invested $1 billion in China's largest e-commerce company, Alibaba.com back in 2005.

Chinese regulators will have the authority to review the Microhoo deal to assess the impact it could have on Alibaba.com.

Nathan G. Bush, an antitrust law specialist with O'Melveny & Myers in Beijing, said the law represented the rise of China "as another regulatory capital contending for influence with Brussels and Washington." He also added that "multinational corporations will need to develop strategies for all the markets they operate in... and China is a big market."

The Chinese government has not yet made it clear what their position is on Microhoo, but it certainly will be interesting to see what effect this has on the Microsoft-Yahoo deal and any other future mergers by global companies.

Posted by Courtney Mills at 9:24 AM GMT