If Yahoo agrees to Microsoft’s buyout offer, the deal would still have to be pass muster with antitrust regulators here in the U.S, in Europe, and in China. As John Markoff points out in the NYT, a new Chinese law that will go into effect in August gives the Chinese government regulatory oversight over any merger that “involve acquisitions of Chinese companies or foreign businesses investing in Chinese companies’ operations.” Yahoo owns a big stake in Chinese Web marketplace Alibaba, which also runs Taobao, Alipay and Yahoo China. It is unclear what China’s position would be on a Microsoft-Yahoo merger, but it could be the first big test of how it is going to exert its new regulatory muscles. Speeding up the deal before the Chinese law goes into effect probably wouldn’t help avoid a Chinese regulatory review, since it is unlikely that any deal would be approved by both the U.S. and Europe before August. (DoubleClick took a year, XM/Sirius took longer).
If China tries to use this opportunity to extract unreasonable concessions from Microsoft, there is always the option to sell Yahoo’s Alibaba stake, which is worth at least $3 billion. But that would mean abandoning a strong foothold in China, a market no Web company can ignore. On the other hand, China could go the other way and show its pro-market stance by being the first to approve the deal. That would be a great goodwill gesture to put out there during the Beijing Olympics.
(Photo by HVargas).