By Ma Jun & Ma Yuan, Research Team on “Invigorating Vitality of Innovation Entities”, Enterprise Research Institute, DRC

Research Report No.152, 2016 (Total 5035) 2016-11-18

Abstract: In recent years, China has witnessed frequent merging cases of leading enterprises relating to their detailed division of horizontal businesses. There are mainly three reasons for that. First, pursuing scale operation and network effect is the innate driver of corporate mergers. Second, investors promote corporate mergers in order to avert risks and improve imputed value. Third, enterprises make industrial chain layout so as to enhance corporate competitiveness. Mergers between leading enterprises in the segmented market have brought about the following impacts. First, Internet companies with strong competitiveness are formed. Second, competition in the segmented market has been weakened. Third, the segmented market has gained a dominant position, which might lead to the abuse of market power. It is suggested that we follow the industrial development law and create a playing field for fair competition. According to the principle of prior application for Internet-company mergers, these applications will be reviewed and approved in a rapid and simple manner. Meanwhile, follow-up assessments about the Internet market competition should be strengthened. Those activities relating to misusing the dominant position after corporate mergers to elbow out other competitors from the market need to be prohibited. In addition, regulations in connection with “Internet plus” should be coordinated and formulated so as to promote fair competition between online and offline enterprises.

Key words: Internet, corporate mergers and acquisitions, policy