1. Introduction

Coordinated effects analysis examines whether a merger or other concentration may make it easier for firms remaining in a market to coordinate their competitive conduct, either expressly or tacitly, thereby reducing effective competition.

The concern is different from a conventional unilateral-effects theory. In unilateral effects analysis, the question is whether the merged undertaking itself will acquire the ability or incentive to raise prices, reduce output, lower quality, restrict innovation, or otherwise harm competition. In coordinated-effects analysis, the concern is that the transaction may change the market structure so that several firms can coordinate more easily or sustain coordination more effectively.

Under China's Anti-Monopoly Law (AML), merger control is administered principally by the State Administration for Market Regulation (SAMR). China's current merger framework expressly recognises coordinated effects as a potential theory of harm in horizontal and, in appropriate circumstances, non-horizontal concentrations.

2. Meaning of Coordinated Effects

Coordinated effects arise where a concentration changes the competitive structure of a market in a manner that makes firms more capable of:

1. reaching a common understanding about competitive parameters;
2. monitoring each other's conduct;
3. detecting deviations from the coordinated outcome;
4. punishing deviations;
5. maintaining coordination over time.

The coordination need not necessarily involve an express agreement.

For example, suppose a market contains five major competitors:

A – 30%
B – 25%
C – 20%
D – 15%
E – 10%

If A acquires E, the market may become more concentrated. The remaining firms may find it easier to observe each other's pricing and output decisions. If the products are homogeneous and prices are transparent, the transaction could potentially make coordinated behaviour more sustainable.

Thus:

Merger → fewer/equally positioned competitors → greater transparency/concentration → easier coordination → increased risk of reduced competition.

3. Coordinated Effects Versus Unilateral Effects

4. Legal Framework in China

The Chinese merger-control regime is principally governed by:

A. Anti-Monopoly Law

The AML regulates concentrations of undertakings and empowers the competition authority to prohibit or condition transactions that eliminate or restrict competition.

B. Relevant Market Guidelines

Market definition remains important because coordinated effects can only be meaningfully assessed within the competitive environment of the relevant product and geographic markets.

C. Horizontal Merger Review Guidelines

China's Guidelines for the Review of Horizontal Concentrations of Undertakings, issued in 2024, provide a more structured framework for analysing horizontal transactions.

D. Non-Horizontal Merger Review Guidelines

China subsequently introduced formal guidance for non-horizontal concentrations, including vertical and conglomerate transactions. The framework recognises that a non-horizontal transaction can sometimes alter market conditions and facilitate coordinated behaviour.

5. Core Elements of Coordinated Effects Analysis

A. Market Concentration

The first question is whether the transaction materially changes market concentration.

SAMR may consider:

• market shares;
• HHI;
• CR3/CR4/CR5;
• number of significant competitors;
• relative strength of competitors;
• distribution of market shares.

A highly concentrated oligopoly is generally more conducive to coordination than a market containing numerous small competitors.

China's current framework uses market-share and concentration measures as important screening indicators.

B. Number of Effective Competitors

The disappearance of one significant competitor can fundamentally change competitive conditions.

For example:

Before merger:

A — B — C — D — E

After merger:

AB — C — D — E

If the transaction eliminates a significant independent competitive constraint, coordination between the remaining firms may become easier.

This was particularly important in China's early HDD merger cases.

6. Market Transparency

Coordination becomes easier where competitors can readily observe:

• prices;
• production volumes;
• customer allocation;
• capacity;
• discounts;
• bidding behaviour;
• inventories;
• contract terms.

Highly transparent markets allow firms to detect deviations quickly.

Conversely, highly differentiated products, secret discounts and complex contractual arrangements may make coordination more difficult.

7. Product Homogeneity

Coordination is generally easier when products are relatively homogeneous.

For example, coordination concerning the price of a standard industrial commodity may be easier than coordination concerning highly differentiated consumer products.

The HDD cases in China illustrate the importance of product homogeneity and market transparency in coordinated-effects analysis.

8. Ability to Monitor Deviations

A coordinated arrangement is unstable if firms cannot determine whether competitors are departing from the coordinated outcome.

Authorities therefore examine whether firms can observe:

• price changes;
• output changes;
• customer movements;
• capacity utilisation;
• tenders;
• discounts;
• supply volumes.

Digital markets may actually increase monitoring capability because automated pricing systems can make prices and market movements highly observable.

9. Ability to Punish Deviations

Coordination requires more than merely reaching a common understanding.

Firms must potentially be able to discipline a firm that deviates.

Possible mechanisms include:

• temporary price reductions;
• increased output;
• customer targeting;
• capacity expansion;
• aggressive bidding;
• withdrawal of supply;
• strategic discounting.

The authority therefore asks whether deviation would be detectable and whether other firms could respond effectively.

10. Role of a Maverick Firm

A maverick is a firm whose competitive behaviour places significant pressure on other firms.

It may:

• consistently offer lower prices;
• expand aggressively;
• introduce new products;
• increase capacity;
• disrupt established market practices.

A merger eliminating a maverick may make coordination easier.

China's current horizontal-merger framework expressly identifies the elimination of a maverick that constrains coordination as a factor relevant to coordinated-effects analysis.

11. Barriers to Entry

High barriers to entry strengthen coordinated-effects concerns.

If coordination causes prices to increase, new firms should theoretically enter and undermine the coordinated outcome.

But where entry requires:

• large capital investment;
• patents;
• technology;
• regulatory approvals;
• distribution networks;
• infrastructure;
• customer relationships;

entry may not provide an effective competitive constraint.

12. Buyer Power

Strong buyers can undermine coordination.

Large customers may:

• negotiate individually;
• switch suppliers;
• threaten to sponsor entry;
• conduct competitive tenders;
• split purchases among suppliers.

Therefore, countervailing buyer power can reduce the likelihood that coordination will successfully harm competition.

The Chinese cases involving coordinated effects have often been associated with markets characterised by oligopoly, transparency and limited countervailing buyer power.

13. Information Exchange

Information exchange is particularly important.

A merger may increase the possibility of coordination where the resulting corporate structure provides competitors with access to competitively sensitive information concerning:

• prices;
• costs;
• customers;
• quantities;
• production plans;
• capacity;
• bids.

This explains why Chinese merger remedies sometimes include:

• information firewalls;
• Chinese walls;
• independent operation;
• restrictions on information exchange;
• hold-separate obligations.

14. Economic Analysis

Coordinated-effects analysis may involve substantial economic evidence.

SAMR may examine:

Quantitative evidence

• market shares;
• HHI;
• price correlations;
• bidding data;
• margins;
• capacity;
• historical pricing;
• demand elasticity.

Qualitative evidence

• market transparency;
• product homogeneity;
• competitor behaviour;
• entry barriers;
• customer power;
• history of coordination;
• existence of a maverick.

China has increasingly used economic analysis in complex merger cases.

15. Important Chinese Case Laws / Merger Decisions

Case 1 — Seagate Technology / Samsung HDD Business (2011)

MOFCOM Decision No. 90 of 2011

This is one of the most important Chinese examples of coordinated-effects analysis.

Seagate proposed acquiring Samsung's HDD business.

The relevant HDD market was relatively concentrated, with a small number of major global competitors. MOFCOM was concerned that eliminating Samsung as an independent competitor would reduce competitive pressure and increase the possibility of coordination among the remaining HDD manufacturers.

Important characteristics included:

• relatively few competitors;
• homogeneous HDD products;
• transparent market conditions;
• substantial concentration;
• limited ability of customers to counteract coordination.

MOFCOM therefore imposed conditions requiring Samsung's HDD business to remain operationally independent for a period and established safeguards against information exchange between Seagate and the Samsung operation.

Principle

A merger that removes an independent competitor from a concentrated and transparent oligopoly can increase the likelihood of coordinated conduct.

16. Case 2 — Western Digital / Hitachi Global Storage Technologies (2012)

MOFCOM's review of Western Digital's acquisition of Hitachi followed closely after Seagate/Samsung.

The transaction concerned another major HDD manufacturer in an already concentrated market.

MOFCOM considered whether removing Hitachi as an independent competitor could:

• reduce competitive pressure;
• increase concentration;
• facilitate coordination;
• weaken incentives for independent competitive behaviour.

The Chinese authority's analysis followed much of the reasoning used in the earlier HDD case.

MOFCOM imposed conditions including a hold-separate requirement, restricting the immediate integration of the businesses.

Principle

The case demonstrates that coordinated-effects analysis can focus on the structural consequences of successive consolidation rather than simply examining the merging firms in isolation.

17. Case 3 — II-VI / Finisar (2019)

This is an important modern Chinese semiconductor example.

II-VI proposed acquiring Finisar, with overlapping activities including the market for wavelength selective switches.

The transaction represented a significant reduction in the number of effective competitors. The combined share was approximately 45–50%, while the top three firms accounted for a very substantial proportion of the market.

SAMR identified both:

• unilateral competitive concerns; and
• potential coordinated-effects concerns.

The market also presented:

• high technological barriers;
• substantial capital requirements;
• limited prospects for rapid entry.

SAMR imposed a hold-separate remedy and safeguards against sensitive information exchange.

Principle

The case demonstrates that coordinated effects may be established through a combination of:

high concentration + few competitors + entry barriers + transparency + elimination of an important competitive constraint.

18. Case 4 — SK Hynix / Intel NAND and SSD Business (2021)

SAMR's review of SK Hynix's acquisition of Intel's NAND and SSD business involved significant horizontal concerns.

The authority considered competitive conditions in enterprise SSD markets, including PCIe and SATA enterprise-class SSDs.

SAMR identified significant barriers to entry arising from:

• demanding quality requirements;
• reliability requirements;
• financial requirements;
• customer qualification;
• technological barriers.

The transaction therefore had implications for both unilateral and coordinated effects.

Notably, SAMR's remedies included commitments directed toward the risk of coordinated conduct, including an undertaking not to coordinate with competitors in China concerning matters such as prices, sales and production volumes.

Principle

Coordinated-effects remedies need not always be structural. They may include behavioural safeguards against information exchange and coordination.

19. Case 5 — Codelco / SQM (2025)

The Codelco/SQM transaction provides an important recent example.

The transaction involved a joint venture between two major Chilean mining companies concerning lithium resources.

SAMR examined the Chinese market for imported lithium carbonate and considered the transaction's effects on China's lithium supply.

The authority identified an increased risk of coordinated conduct among the leading suppliers. The post-transaction structure was particularly important because the merged entity and two major competitors collectively represented more than approximately 75% of the market under the framework described in China's newer merger guidance.

SAMR conditionally approved the transaction with behavioural commitments, including:

• supply commitments;
• FRAND-type supply obligations;
• protection of existing contracts;
• safeguards concerning supply disruptions;
• commitments concerning competitively sensitive information.

Principle

Codelco/SQM illustrates the increasing use of quantitative concentration thresholds combined with qualitative structural analysis.

20. Case 6 — Rio Tinto / Arcadium Lithium (2025)

SAMR's review of Rio Tinto's acquisition of Arcadium Lithium also involved the Chinese lithium-carbonate market.

The transaction was examined for horizontal effects, including potential coordinated effects among the leading lithium carbonate suppliers.

The case is significant because the authority considered not only market shares but also:

• China's dependence on imported lithium;
• market structure;
• concentration among leading suppliers;
• supply conditions;
• potential coordination;
• access to lithium carbonate for Chinese customers.

The transaction received conditional clearance with commitments concerning supply and competitively sensitive information.

Principle

The case illustrates that coordinated-effects analysis may incorporate supply security and market-specific structural characteristics alongside conventional concentration analysis.

21. Consolidated Case-Law Table

The first three cases are particularly important because Chinese merger-control commentary identifies Seagate/Samsung, Western Digital/Hitachi and II-VI/Finisar as notable Chinese decisions expressly involving the possibility of collusive or coordinated conduct.

22. Quantitative Screening Under the Modern Chinese Framework

China's newer horizontal merger framework provides more explicit quantitative indicators.

SAMR's framework can identify coordinated-effects concerns where, for example:

• the merged entity and one competitor each have more than 10% and together account for at least two-thirds of the market;
• the merged entity and two competitors each have more than 10% and together account for at least 75%; or
• the transaction eliminates a maverick that previously constrained coordination. 

These are screening/analytical indicators, not a substitute for the complete competitive-effects analysis.

The authority can still examine:

• entry;
• buyer power;
• innovation;
• market transparency;
• product differentiation;
• supply conditions;
• historical competitive behaviour.

23. Coordinated Effects in Digital Markets

The analysis becomes more complicated in digital markets.

Relevant factors include:

A. Algorithmic pricing

Algorithms may make prices extremely transparent.

B. Real-time monitoring

Platforms can observe competitors' prices almost immediately.

C. Multi-market contact

Large platforms may compete with each other across several markets, potentially increasing opportunities for strategic interaction.

D. Data concentration

A merger can increase access to:

• consumer data;
• transaction data;
• pricing information;
• demand forecasts.

E. Network effects

Large platforms may become more difficult for rivals to challenge.

F. Platform interoperability

Changes in interoperability may affect the competitive constraints faced by other firms.

China's merger framework increasingly considers digital-market characteristics, including ecosystem effects, interoperability and access to important resources.

24. Coordinated Effects and Information Exchange

One of the most important practical consequences of coordinated-effects analysis is the regulation of information flows.

A merger may therefore result in conditions such as:

1. Chinese walls;
2. separate management;
3. independent pricing;
4. restrictions on competitively sensitive information;
5. separate sales teams;
6. prohibition on exchanging future pricing information;
7. independent bidding;
8. monitoring trustees.

The HDD and semiconductor cases demonstrate this approach.

25. Coordinated Effects and Successive Mergers

A particularly important issue is cumulative concentration.

Consider:

Transaction 1: A + B
Transaction 2: C + D
Transaction 3: E + F

Each transaction might appear manageable individually.

However, collectively they may transform:

8 competitors → 6 → 5 → 4

into a highly concentrated oligopoly.

Accordingly, an authority should consider the existing structure of the market, not simply the incremental concentration caused by the immediate transaction.

The Chinese HDD cases are especially useful for demonstrating the importance of sequential consolidation.

26. Coordinated Effects and Joint Ventures

Joint ventures can also generate coordinated-effects concerns.

A joint venture may:

• reduce independent decision-making;
• facilitate information exchange;
• align incentives of previously competing firms;
• create common ownership or control;
• increase market transparency.

Thus, the same principles can apply to:

• full mergers;
• acquisitions;
• joint ventures;
• acquisitions of controlling interests;
• certain structural arrangements.

27. Defences Against Coordinated-Effects Concerns

Merging parties may attempt to demonstrate that coordination is unlikely because of:

1. Strong buyer power

Large purchasers can discipline suppliers.

2. Low barriers to entry

New competitors can enter rapidly.

3. Product differentiation

Different products make coordination difficult.

4. Demand volatility

Unpredictable demand makes coordination unstable.

5. Secret discounts

Firms cannot easily observe rivals' actual prices.

6. Rapid innovation

Technological change disrupts established market positions.

7. Maverick competitors

Aggressive competitors can destabilise coordination.

8. Strong efficiencies

Efficiency gains may strengthen competitive pressure, although efficiencies must be substantiated and linked to the transaction.

28. Remedies for Coordinated Effects

SAMR may use several types of remedies.

A. Structural Remedies

Examples include:

• divestiture;
• sale of assets;
• sale of businesses;
• disposal of intellectual property.

B. Behavioural Remedies

Examples include:

• FRAND supply;
• non-discrimination;
• information firewalls;
• independent operation;
• supply commitments;
• prohibition of information exchange.

C. Hold-Separate Remedies

The acquired business remains operationally independent for a specified period.

This remedy has been particularly important in Chinese merger enforcement.

29. Analytical Flowchart

Proposed concentration

↓

Define relevant product and geographic market

↓

Determine pre- and post-transaction concentration

↓

Identify number and strength of remaining competitors

↓

Examine market transparency

↓

Examine product homogeneity/differentiation

↓

Assess entry and expansion barriers

↓

Assess buyer power

↓

Identify maverick firms

↓

Determine whether firms can reach a common understanding

↓

Determine whether deviations can be monitored

↓

Determine whether deviations can be punished

↓

Assess whether coordination could be sustained

↓

Consider efficiencies and countervailing factors

↓

Determine whether competition may be eliminated/restricted

↓

Unconditional clearance / remedies / prohibition

30. Difference Between Coordination and Parallel Conduct

An important examination point is that parallel behaviour alone does not necessarily establish unlawful coordination.

For example, if three firms independently increase prices because their costs increase simultaneously, their parallel pricing does not automatically demonstrate collusion.

Coordinated-effects merger control instead asks whether the transaction changes structural conditions in a way that makes coordination materially more likely or sustainable.

Therefore:

Parallel conduct ≠ automatically coordination.

The merger authority must assess the economic conditions supporting the coordination theory.

31. Importance of Coordinated Effects Analysis in China

Chinese merger enforcement has historically discussed coordinated effects less frequently than unilateral effects, but the doctrine has nevertheless appeared in important cases.

A review of Chinese merger decisions has identified II-VI/Finisar, Western Digital/Hitachi and Seagate/Samsung as particularly notable examples involving potential collusive effects.

More recent guidance makes the framework considerably more explicit by identifying:

• concentration;
• number of competitors;
• market shares;
• elimination of mavericks;
• market transparency;
• coordination incentives;
• competitive structure

as relevant considerations.

32. Conclusion

Coordinated effects analysis asks whether a concentration changes market structure so that several firms can coordinate competitive behaviour more easily, detect deviations more effectively and sustain coordinated outcomes.

In China, the analysis is particularly relevant in concentrated oligopolistic markets. The principal indicators include:

• high market concentration;
• reduction in the number of competitors;
• homogeneous products;
• market transparency;
• high barriers to entry;
• weak countervailing buyer power;
• elimination of a maverick;
• ability to monitor and punish deviations;
• history or structural possibility of coordination.

The Chinese decisions in Seagate/Samsung, Western Digital/Hitachi, II-VI/Finisar, SK Hynix/Intel, Codelco/SQM and Rio Tinto/Arcadium demonstrate the evolution from relatively case-specific analysis toward a more structured assessment of coordinated effects. Recent Chinese merger guidance has further formalised quantitative and qualitative indicators for identifying coordination risks.