When Yahoo invested $1 billion in Chinese e-commerce company Alibaba.com, it may have put itself under the jurisdiction of a new antitrust law, reports the New York Times. The law, which goes into effect August 1, gives Chinese regulators the authority to examine foreign mergers when the foreign companies involved invest in Chinese companies.

Legal experts say the law could make China a worldwide regulatory powerhouse on par with Washington and Brussels. However, the specifics of how China might influence a merger between Microsoft and Yahoo are fuzzy. The story notes:

There are potentially dozens of jurisdictions that could claim oversight in such a deal because of the global business interests of the two huge companies and because it could potentially transform the Internet into two megaportals, Google and Microsoft. Other parts of the world that might have an active interest in the outcome of a merger include South Korea, a vibrant Internet economy where an antitrust investigation into Microsoft was previously opened.

Americans like to think of companies founded here as their own, even when those companies have huge global operations and their stock trades on international exchanges. But at what point is it reasonable for a company's M&A activity to fall under the jurisdiction of a country's regulators? Does Yahoo's 40% interest in Alibaba.com justify Chinese oversight of a Microsoft/Yahoo deal? Fairness aside, if the Chinese government decides to step in, what kinds of concessions would the it likely demand of Microsoft in order to approve the deal? Privacy of citizen's personal information doesn't seem to be what Chinese officials are all about, but a requirement to censor search results might be something to fear.

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