Google's Motorola Purchase Hits Major Snag In China

IT Management

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By now you're probably aware of Google's attempts to purchase troubled mobile phone maker Motorola Mobility. If not, here's the gist: in August of 2011, Google and Motorola reached an agreement whereby Google paid $12.5 billion for Motorola Mobility, effectively gaining its own phone manufacturing arm and getting a huge patent portfolio in the deal. The only major obstacle was regulatory approval.

Fast forward to February, when the U.S. Department of Justice announced that it had concluded its antitrust investigation of the deal, and would allow the acquisition to proceed. That left the deal free to proceed, right? After all, Google and Motorola are both American companies, and the American government had signed off on the deal, so there shouldn't be any obstacles to it going forward. Except that that wasn't the end of it at all. The deal still had regulatory hurdles to clear in several other countries, including Russia, Canada, and China. The European Union was also conducting its own investigation, but cleared the deal on the same day as the U.S. DOJ.

While regulatory approval in other countries has proceeded quite fairly smoothly in other countries, it appears that China is in no great hurry to sign off on the deal. According to a report today by the New York Times, China's Ministry of Commerce, which is responsible for antitrust investigations, has been moving slowly. The decidedly unfriendly relationship Google and China have had over the years - stemming largely from Google's refusal to engage in the kind of censorship demanded by the Chinese government - might tend to suggest that the Ministry of Commerce is deliberately dragging its feet. It seems, however, that China has been taking extra care in examining several such deals in recent years, and has caused significant delays in numerous acquisitions.

I contacted Google to see what they thought about China's slow pace in approving the deal, and the response was optimistic. Here's what Google's spokesperson had to say: "We continue to await regulatory approval in China and to work closely with regulators. We still expect the deal to close in the first half of 2012."

Now, that doesn't mean that China isn't deliberately dragging its feet. Nevertheless, it seems likely that the deal will ultimately go through. For one thing, China has only blocked one acquisition since the passage of the 2008 law that expanded the Ministry of Commerce's antitrust powers, and that was the purchase of a Chinese drink company by Coca-Cola. Though China may have reason to be annoyed at Google, it isn't ultimately in China's interests to block the deal.

Nevertheless, it remains to be seen whether the deal will close on Google's timeline. The first half of 2012 is, after all, drawing rapidly to a close.