On August 14, 2012, the Chinese Ministry of Commerce ("MOFCOM") released its announcement on the approval of the planned acquisition of 33.6 percent equity in Newheight Holdings by Wal-Mart subject to conditions. This is the first published decision by MOFCOM regarding a merger review of a transaction involving variable interest entity ("VIE") structures. The decision provides a good platform to discuss the feasibility, the underlying issues, and the likely results of merger control filings involving VIE structures.
As further analyzed below, we believe that the VIE structure is a special issue of concern for MOFCOM during its anti-monopoly review. In order to better understand the background of MOFCOM's Wal-Mart/Newheight decision, we first briefly introduce the VIE structure and its application in China.