OECD kpcdb

 

1. Scope

MOFCOM will review a notified transaction to determine whether it leads or may lead to elimination or restriction of competition and may prohibit it under Article 28.

Article 20 provides that a concentration refers to the merger of business operators acquiring control over other business operators by virtue of acquiring their equities or assets; or acquiring control over other business operators or the possibility to exercise decisive influence on other business operators by virtue of contact or any other means.

2. Notification

According to Article 21, where the intended concentration reaches the threshold level as set by the State Council, the merger must be notified to MOFCOM in advance. A concentration must not be implemented until clearance has been given by MOFCOM.

This threshold is deemed to be met when the combined national turnover of each of at least two business operators to the concentration in the last financial year is over CNY400 million and either the combined aggregate worldwide turnover of all the business operators to the concentration within the last financial year is greater than CNY10 billion or the combined aggregate turnover within China is greater than CNY2 billion.

3. Procedural rules

Under Article 25, the authority shall make a preliminary review of the merger within 30 days from the date it receives the documents or materials submitted by the undertakings.

Where the authority decides not to conduct further review or fails to make such a decision at the expiration of the specified time limit, the undertakings may implement the merger. There is no possibility of extension of this deadline.

Under Article 26, where the authority decides to conduct further review, it shall, within an additional 90 days, complete such review and decide whether to prohibit the merger, and notify the undertakings of such decision in writing.

The review period may be extended by a maximum of 60 days, if:

a)     the undertakings agree to the extension;

b)     the documents or materials submitted by the undertakings are inaccurate and therefore need further verification; or

c)      major changes have taken place after the undertakings made the declaration.

Where the authority fails to make a decision at the expiration of the time limit, the undertakings may implement the concentration.

Under Article 28, if the merger parties can prove that the advantages of the merger to competition outweigh the disadvantages, or that the merger is pursuant to public interests, the authority may decide not to prohibit their concentration.

Under Article 29, where the authority does not prohibit a merger, it may decide to impose additional, restrictive conditions to lessen the negative impact on competition, exerted by such a merger.

Under Article 30 AML, MOFCOM is required to publish its decision that prohibit or conditionally clear deals.

Procedural fairness: MOFCOM has issued the Measures on the Review of Concentrations of Undertakings (“Measures”) which provides rules on hearing, including initiation of hearings, hearing attendees, confidentiality and procedures to be followed. Under Article 10 of the Measures, MOFCOM is required to issue statement of objections and to set a reasonable time limit for parties to submit their written defence.

 

4. Assessment

According to Article 27, factors taken into consideration in merger review are as follows:

a)     the market shares of the undertakings involved in concentration in a relevant market, and their power of control over the market

b)     the degree of concentration in the relevant market

c)      the impact of their concentration on assess to the market and technological advance

d)     the impact of their concentration on consumers and the other relevant undertakings concerned

e)     the impact of their concentration on the development of the national economy

f)       other factors which the authority for enforcement of the Anti-monopoly Law under the State Council deems to need consideration in terms of its impact on market competition.

5. Remedies and sanctions

Under Article 29, MOFCOM may accept conditions to reduce the negative impact on competition of a merger. Such conditions may include structural or behavioural undertakings.

According to Article 48, MOFCOM may instruct undertakings in violation of the AML to discontinue such concentration, and within a specified time limit to dispose of their shares or assets, transfer the business and adopt other necessary measures to return to the state prior to the concentration. It may also impose on the undertakings a fine of not more than CNY500,000.

MOFCOM may clear mergers with remedies. It has issued guidelines such as Interim Measures on the Divestiture of Assets or Businesses when Implementing Concentrations of Undertakings.

Failure to notify: MOFCOM may impose administrative penalties of up to CNY 500,000 for failure to notify or for completing a transaction prior to clearance decision.