• Effects of 'Guiding Opinions' on Filing of Simple Cases of Concentration of Business Operations in Merger Control Filings
  • August 21, 2014 | Author: Dawn (Dan) Zhang
  • Law Firm: Greenberg Traurig, LLP - Shanghai Office
  • I. Background

    In February of this year, the PRC Ministry of Commerce (MOFCOM) released the Tentative Provisions on Standards Applicable to Simple Cases of Concentration of Business Operations (for Trial Implementation) (the Tentative Provisions). The Tentative Provisions set forth the standards for “simple” merger cases, which include cases in which: (i) for business operations participating in the concentration that have a horizontal relationship, the aggregate market share is less than 15 percent; (ii) for business operations participating in the concentration that have a vertical relationship, and the market share of each business operation accounts for less than 25 percent in both the upstream market and downstream markets; (iii) the business operations participating in the concentration neither have a horizontal nor vertical relationship and account for less than a 25 percent market share in their respective markets that relate to the concentration; (iv) the business operations participating in the concentration establish a joint venture outside China, and the joint venture does not engage in any economic activities within China; (v) the business operations participating in the concentration acquire the equities or assets of overseas enterprises, and the overseas enterprises do not engage in any economic activities in China; (vi) a joint venture mutually controlled by more than two business operations is controlled through the concentration by one or more of such business operations. However, the Tentative Provisions do not provide the filing procedures for such cases.

    In April, MOFCOM released Guiding Opinions on Filing of Simple Cases of Concentration of Business Operations (the Guiding Opinions), which set forth basic procedures and relevant filing materials for simple cases, as summarized below.

    II. Procedure and Filing Materials for Simple Cases

    A. Procedure

    1. Voluntary Application

    The Guiding Opinions provide that for concentrations that meet the standards of simple cases, the notifying party may apply with the Anti-monopoly Bureau (the Bureau) to file the concentration according to the procedure for simple cases; however, without application by the notifying party, the concentration will not be treated as a simple case.

    2. Conversion to Non-simple Case

    After filing materials are submitted to the Bureau, the Bureau examines the materials and determines whether the case meets the standard for simple cases. In the event the case does not meet the standard, the notifying party should re-file the case as a non-simple case. In addition, any time during the Bureau’s review of the case, the Bureau may determine that the case does not meet the standard, revoke its determination as a simple case, and order the notifying party to re-file as a non-simple case.

    3. Disclosure Requirements

    According to the Guiding Opinions, the notifying party should submit a disclosure form along with other filing materials. The disclosure form should include a description of the transaction within 200 words, brief introduction of the concentration business operations, and the reason for applying as a simple case. In the event that the reason for application is based on market shares, the defined product market and geographical market should be specified along with relevant market shares, which may be provided in the form of a range of less than 5 percent. The disclosure form will then be published on the website of the Bureau for a disclosure period of 10 days. During the disclosure period, any third party may submit a written opinion to the Bureau on whether the concentration should be treated as a simple case. Any such objection should be raised within the disclosure period, and should be submitted along with relevant evidence and contact information.

    B. Filing Materials

    Compared to the required filing materials for non-simple cases, the Guiding Opinions no longer require the following information for simple cases:

    1. The names and shareholding structure of non-PRC affiliates of the concentration business operations;
    2. The basic information, business licenses and approval certificates of PRC affiliates of the concentration business operations;
    3. The demand and supply structure of the relevant markets, including the names of the major suppliers and customers and their contact information, volume and value of the relevant products etc.;
    4. Market entry information, including the market entrants in the past five years, potential market entrants, and difficulty in entering the market;
    5. Horizontal or vertical cooperation agreements;
    6. Efficiency of concentration;
    7. Whether the concentrations involves bankrupt companies or companies facing bankruptcy;
    8. Opinions in this concentration of other entities.

    The Guiding Opinions also require additional filing information as to the reasons for applying as a simple case.

    Summary and Observations

    Compared to the non-simple case, the filing of a simple case requires less filing materials. Particularly, the Guiding Opinions have simplified the disclosure requirements for the affiliates of concentration business operations. Thus, the concentration business operations no longer need to describe complicated shareholding structure with affiliates or collecting certificates from PRC affiliates. The Guiding Opinions also have deleted the requirements for disclosing demand and supply structure of the relevant markets and relevant data, so that the concentration business operations no longer need to calculate such data or bear the business risk of disclosing such sensitive commercial information. The Guiding Opinions still do not make clear the timing of simple case filing procedure. However, we believe that given the nature of such cases and the reduced requirements as to filing materials, the review period of simple cases should be shorter than that of non-simple cases. It is notable that the Guiding Opinions do provide that under certain circumstances, a simple case may be converted to non-simple cases and is subject to re-filing as a non-simple case. In this event, the entire filing process may be even longer than filing as a non-simple case at the outset. In addition, the Tentative Provisions give the Bureau very broad scope of discretion to revoke the determination of a simple case. In light of the above, we suggest that parties to a concentration consult with the Bureau before filing as a simple case, in order to better evaluate whether the concentration in fact meets the standard for a simple case.