Beijing is preparing to exact a form of revenge after its failed attempt to grab a stake in global mining giant Rio Tinto. Its weapon: the country's new antitrust law that could now threaten Rio's planned iron ore venture with rival BHP Billiton. Fearful of an effective global monopoly in iron ore supply, mainland steelmakers are pinning their hopes on an antitrust investigation that could help block the establishment of the venture. Or Beijing could impose sanctions on its operation in China, the world's biggest producer of steel. Rio and BHP, the world's second- and third-largest iron ore producers, earlier this month reached a non-binding agreement to set up a 50-50 joint venture covering their Western Australian iron ore operations. The deal came after debt-ridden Rio cancelled a proposed US$19.5 billion tie-up with mainland state-owned Aluminum Corp of China (Chinalco) following political opposition in Australia. The Rio-BHP venture will cut costs for the miners but has provoked opposition from steelmakers in China, Japan and Europe, countries that are heavily reliant on imported iron ore. They say the tie-up would further concentrate supply in the hands of a few players in a market where prices of ore have quadrupled from 2004 to last year. A Rio-BHP tie-up would put them ahead of Brazil's Vale in terms of market share, although they said they would maintain separate sales. The Big Three control about 70 per cent of the world's seaborne iron ore trade. Although it is not a merger deal and the deal is outside the mainland, there are growing calls for it to be blocked by Beijing. Mei Xinyu, a researcher at the Ministry of Commerce's Research Institute of Foreign Trade and Economic Co-operation, said China's anti-monopoly law offered sufficient legal grounds to stall the alliance. For example, Article 2 of the statute states that the law shall apply to conduct outside China if it eliminates or has a restrictive effect on competition in the domestic market. 'As the Western Australia assets are their [Rio and BHP] major assets, it is certain that the proposed joint venture will jeopardise or limit domestic competition in China,' Mr Mei said. Wu Hanhong, an anti-monopoly expert at the Economics School at Renmin University of China, claimed Beijing could easily find two areas to challenge the deal. 'First, the two iron ore suppliers are likely to be abusing their dominant positions in the market. Secondly, the joint-venture move is likely to jeopardise or limit domestic competition in China,' Mr Wu said. Analysts said Beijing might even be prepared to impose trade sanctions against the venture if the two miners merged their Australian iron ore operations without the approval of Chinese competition agencies. So far, Beijing is soft-pedalling on any hard action against the deal. Assistant Commerce Minister Wang Chao declined to respond to reporters' questions about whether China would use any other punitive tariffs to block the deal. 'All [our response and actions] will proceed in line with the law, and the final ruling [of the Rio-BHP deal] will be done on the basis of law and facts,' Mr Wang said on the sidelines of a forum on Friday. A press officer at the commerce ministry said the ministry would hold a regular press conference today to outline Beijing's stance on the Rio-BHP deal. 'Beijing will surely take blocking measures against the proposed venture, and there is no possibility that it will allow the plan to succeed,' said Xu Jie, an analyst at Beijing Securities. 'The anti-monopoly law will be a major tool for stymieing the deal.' Although it has been 10 months since the antitrust law came into effect, the State Administration of Industry and Commerce, the major antitrust regulator, has not yet launched an action under the statute. This is despite speculation that it already has received more than 1,000 complaints of anti-competitive conduct. International law firm Jones Day said the recent promulgation of two sets of procedural rules to implement the antitrust law may herald the start of anti-monopoly enforcement by the regulator. One set of rules deals with procedures for the investigation and handling of cases involving monopoly agreements and abuses of dominant market position, while the other specifies procedures for investigating and handling administrative monopolies. Both take effect on July 1. But the planned venture's nuanced structure could mean they may sidestep some antitrust concerns. Rio and BHP stressed that their planned venture would not change market supply or pricing strategy, as both would sell iron ore independently through their own marketing groups. Zou Zhendong, a senior partner at Sinowing Law Firm, said it would be a challenge for antitrust authorities to pin down any anti-competitive conduct in this case. 'As the venture is a type of business co-operation, not an equity co-operation or merger, it will be difficult to [prove] the two parent companies have negotiated prices of the iron ore they sell,' Mr Zou said. Mainland steelmakers are seeking a 40 to 45 per cent cut in this year's contract iron ore price. Japanese and South Korean steelmakers have already agreed with Rio on a 33 per cent cut and with Vale for a 28 per cent reduction. The China Iron and Steel Association said it would not make concessions in the talks and is preparing to cut steel output if the price talks failed. The Australian government has given its cautious support to the Rio-BHP alliance, with Resources Minister Martin Ferguson saying he saw benefits in the deal. At the same time, he also played down the threat of any sharp reaction from China. 'We will get through it. In the end, China needs our resources and Australia needs China,' he said. The two iron ore miners said they could save at least US$10 billion from the joint operation.