Sept. 5 – China’s new anti-monopoly law will be put to the test with Coca-Cola’s proposed US$2.4 billion purchase of Huiyuan Juice Group.

If the bid pushes through, it will be the largest takeover of a local company by a foreign firm and will give Coca-Cola control of 43 percent of China’s fresh juice market. In 2007, the two companies had a combined global turnover worth more than RMB10 billion with each of them making close to RMB400 million in the country.

The anti-monopoly law aims to protect market competition by regulating price-fixing and other forms of collusion. It bans monopoly acts like: reaching monopolizing agreements; abusing a dominant market position; and concentration of business operations that which may exclude or restrict competition.

Since taking effect last month, the anti-monopoly law has only issued basic guidelines. It remains to be seen how it will affect the pending Coke deal. Yesterday, Huiyuan’s shares closed 7.68 percent lower in Hong Kong stock market at HKD10.10 dollars on fears that Beijing might not approve the buyout.

Coca-Cola wants to diversify its market beyond carbonated drinks in anticipation of increasing demand for concentrated juices when rising incomes will be able to afford healthier lifestyles. It is expecting that more than 80 percent of future growth will come from markets outside the United States.

In a press statement, Coca-Cola called Huiyuan a “long-established and successful juice brand in China.” The Beijing-based company is one of the one of the country’s largest producers of fresh orange, apple and pear juice. Huiyuan has 31 China factories and is a strong market presence in top cities like Beijing and Shanghai. The company also exports to 30 countries including the United States and Japan.

Coca-Cola spokesman, Geoff Walsh, told the New York Times, “It’s just so complementary to our business in China.” He said that the Huiyuan brand had a compound annual growth rate of 31 percent in the past three years and that the Chinese juice market has so far grown by about 12 percent annually.