- China Issues Provisions to Govern Simple Anti-Monopoly Cases
- March 6, 2014 | Authors: Brian D. Beglin; Davina Garrod; Jin Wang; Xiaowei Ye
- Law Firms: Bingham McCutchen LLP - Beijing Office ; Bingham McCutchen LLP - London Office ; Bingham McCutchen LLP - Beijing Office
The Ministry of Commerce (“MOFCOM”) has issued Interim Provisions on the Standards Applicable to Simple Cases of Concentration of Business Operators (the “Provisions”) effective as of February 12, 2014, to define which M&A cases required to be reviewed by MOFCOM under China’s Anti-monopoly Law will and will not be deemed “simple” anti-monopoly cases. The Provisions appear to have been influenced by the European Commission’s simplified merger review procedure, which itself has just been expanded to cover more transactions.1 Although the Provisions do not establish a streamlined procedure for processing simple cases, it is generally expected that under the yet-to-be issued rules to implement the Provisions, simple cases will enjoy procedural benefits that will speed up the MOFCOM anti-monopoly review process.
1 Simple Anti-monopoly Case Defined
According to the Provisions, subject to certain exceptions noted below, a case will be deemed a simple case for the purpose of MOFCOM’s anti-monopoly review if it falls within any of the following situations:
- Where the business operators participating in the concentration are in the same market, the combined market share of these operators is less than 15%;
- Where an upstream or downstream relationship exists between the business operators participating in the concentration, the combined market share of these operators is less than 25% in each of the upstream and the downstream markets;
- Where the business operators participating in the concentration are not in the same market, or where no upstream or downstream relationship exists between the business operators participating in the concentration, the combined market share of these operators is less than 25% in each market;
- Where a business operator participating in the concentration establishes a joint venture outside China, the joint venture does not engage in any business activities within China;
- Where a business operator participating in the concentration acquires the equity or assets of an overseas enterprise, the overseas enterprise does not engage in any business activities within China; or
- Where a joint venture that is jointly controlled by two or more business operators will be controlled by one or more of such business operators after the concentration.
Even if a case satisfies the conditions in Section 1 above, it will not be deemed a simple anti-monopoly case:
- Where a joint venture that is jointly controlled by two or more business operators will be controlled by one of such business operators after the concentration, and the said business operator competes against the joint venture in the same market;
- Where the relevant market in a concentration transaction is difficult to define;
- Where the concentration transaction may have adverse effects on market entry or technological advances;
- Where the concentration transaction may have adverse effects on consumers and other relevant business operators;
- Where the concentration transaction may have adverse effects on the development of China’s national economy; or
- Any other situation where MOFCOM believes the concentration transaction may have adverse effects on market competition.
Last December MOFCOM issued a report on its efforts to improve its efficiency in implementing Anti-monopoly Reviews of Concentration of Undertakings.2 Although improvements in its processing times were noted, it nonetheless reported a considerable gap between its case processing times and those prevailing in the US and the EU. MOFCOM reported that only 13% of the 161 cases it concluded in the January to October 2013 period were concluded in the first 30-day review period, with 80.7% being advanced to the second 90-day review period before they were concluded.3 This stands in sharp contrast to the review times under America’s Hart-Scott-Rodino and the European Commission’s pre-merger filing regimes. In the US, only 3.5% of the 1,429 cases filed in fiscal 2012 resulted in a request for additional information and documentary material ( known as a “second request”), thereby pushing the review process beyond the initial 30-day waiting period.4 The proportion of EC mergers decided during the in-depth Phase II review was even lower (2.2%) in 2013.5
While the exceptions to “simple case” status under the Provisions leave considerable scope for MOFCOM to assert its review jurisdiction in just about any case meeting its filing thresholds, as they remain likely to do in cases involving sensitive industries or where local competitors complain, the effort expended by MOFCOM to formulate and promulgate sensible simple case definitions evidence its sincere intention to address a significant shortcoming.
1 Commission Notice of 5 December 2013 on a Simplified Procedure for Treatment of Certain Concentrations under Council Regulation (EC) No 139/2004. The Notice forms part of the ‘merger simplification package’, which is applicable as of 1 January 2014 (Official Journal C 366, 14.12.2013, p. 5).
2 Available in English at http://english.mofcom.gov.cn/article/zt&under;review2013/column1/
201401/20140100453521.shtml and in Chinese at http://www.mofcom.gov.en/article/ae/ai/201312/
3 Id. MOFCOM’s 180-day statutory merger review period is comprised of three phases: (i) phase I is 30 calendar days; (ii) phase II is 90 calendar days; and (iii) phase III (extended review) is 60 calendar days. The reported performance does not include the case review/process time MOFCOM takes before it officially accepts a case for filing, thereby starting the 3-phase statutory clock.
4 See Federal Trade Commission and U.S. Department of Justice Hart-Scott-Rodino Annual Report, Fiscal 2012 at 5-6, http://www.ftc.gov/sites/default/files/documents/reports&under;annual/35th-report-fy2012/130430hsrreport&under;0.pdf. The corresponding percentage for fiscal years 2003-2011 ranged between a low of 2.5% and a high of 4.5%.
5 In Europe, 277 cases were notified in 2013. The European Commission made 252 decisions during a Phase I review (i.e., 91%) and 6 cases were decided in Phase II (i.e., 2.2%). The remaining cases were either withdrawn or subject to a referral request. See European Commission DG COMP merger decision statistics webpage at http://ec.europa.eu/competition/mergers/statistics.pdf