Signs that all was not well for The Coca-Cola Co. in its attempts to acquire China Huiyuan Juice Group emerged earlier this week when reports suggested the US drinks giant was considering walking away from the deal.

The Chinese Ministry of Commerce was looking to Coca-Cola to give up the rights to the Huiyuan brand name in order to wave the deal through the anti-trust process, the UK's Financial Times reported. In truth it was always going to be too much to ask of Coca-Cola, which was willing to stump up a whopping US$2.4bn for the country's leading juice business.

In a statement today (18 march), the Ministry said talks to find a compromise had failed.

"Coca-Cola expressed its own opinions about the issues raised by the Ministry of Commerce, and submitted a preliminary resolution proposal and a revised proposal. After evaluation, the Ministry of Commerce believes this revised proposal still could not effectively reduce the negative impact on competition of this concentration,” the Ministry said. “Therefore, based on Article 28 of the Anti-Monopoly Law, the Ministry of Commerce has made the decision to forbid the deal.”

Coca-Cola has no means to appeal the ruling. Case closed.

The ruling is likely to have huge international ramifications and many Western commentators - and not a few within China too - have already slammed the decision as protectionist, with negative consequences for international trade and the long term health of the Chinese economy.

Many have already taken it to mean that the Ministry of Commerce is going to take a very tough line on foreign acquisitions of leading Chinese brands – although this doesn't necessarily differentiate it from some Western powers, such as France.

It also means other major international businesses – and not just those in food and drinks - will be far more cautious about investing in takeovers in the country, even when they are priced at such a rich premium as this one.

The Chinese will also no doubt be accused of double standards, with Chinese companies looking to invest overseas whilst the Government blocks similar moves by multinationals on home soil.

There is little doubt that the move by Coca-Cola to acquire the juice maker met with strong opposition from within the Chinese drinks sector and the general public and there are suggestions China may have bowed to this pressure to protect a “national asset”.

But, the truth is that this was a borderline case and whilst some will argue that this was undoubtedly a political decision, others will be able to point to fairly strong evidence of the legality, on an international level, of the ruling.

"You cannot say that this objection is not justified because the acquisition itself does form a large monopoly threat," Qian Weiqing, a senior partner at Dacheng Law Firm in Beijing, was quoted in the international press saying this morning. "I think this deal shows that China's legal environment is getting closer to that in the international market," he added. "It is quite common for such deals to be rejected globally, and this is just business."

Huiyuan controls around a 40% share of the pure juice market. Combined, analysts have estimated, Coca-Cola and Huiyuan would control around 20% of the entire Chinese juice market. On top of this, the Chinese government has expressed concerns that Coca-Cola could leverage its position as a global soft drinks giant in order to market bundles of soft drinks products and demand exclusive dealing requirements with retailers that could squeeze out smaller rivals.

Indeed, in its statement the Chinese Ministry of Commerce was at pains to stress that it was not institutionally protectionist. It said that it had ruled on 24 cases since the Anti-Monopoly Law was launched in August 2008 before the Coca-Cola case.

"Among those, 23 cases were approved without any conditions; for the one that would have excluded and restricted competition, the Ministry talked with the applicant, and the applicant provided a solution for reducing restrictions on competition and made promises, for which the Ministry finally approved the deal with a restrictive condition of reducing unfavourable impacts on competition," the statement said.

That said, others have expressed doubts on the validity of the ruling. A 20% share of the juice market is not necessarily prohibitive to competition, particularly in a market as fast growing and as dynamic as China.

The question here for the future is not whether the decision was necessarily right or wrong – as it an be argued either way - but what were the real motivations behind the decision – consumer rights or national protectionism and political self interest?

As for Coca-Cola, this is a serious blow to its international aspirations, in particular China.

It is only a matter of weeks since Coca-Cola executives were cutting a ribbon on a new $90m innovation and technology centre in Shanghai, having just pledged to invest $2bn in China – more than last year’s total capital spending – by 2012.

Questions will now inevitably abound about the future of that investment. And the US giant will view this market with less enthusiasm, certainly in the short term. Options are still open to it and it may look to take a minority stake in Huiyuan. It may also choose to move through its regional bottler Swire Beverages, which would certainly offer a more palatable political alternative.

However, Coca-Cola, of course, will not abandon China. It is already its third largest market – trailing only the US and Mexico – and at the very heart of its global growth strategy.