IFLRinternational financial law review

Merger ControlSurvey 2015

Lead contributors Ian Giles and Marc Waha

Merg

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SURVEY PARTICIPANTS

IFLRinternational financial law review

AUSTRALIA BRAZIL CANADA CHINA

EUROPEAN UNION GERMANY HONG KONG INDONESIA

ITALY JAPAN NETHERLANDS NORWAY

PORTUGAL ROMANIA RUSSIA SPAIN

SWITZERLAND TAIWAN TURKEY UNITED KINGDOM

UNITED STATES

COMESA EUROPEAN COMMISION KPPU

CHINA

IFLR SURVEY | MERGER CONTROL 2015 61

1. REGULATORY FRAMEWORK

1.1 What is the applicable legislation and who enforces it? Merger control is regulated under the Anti-monopoly Law of the People’sRepublic of China (the AML), which entered into force on August 1 2008.

The Ministry of Commerce (Mofcom) has sole jurisdiction for merger con-trol enforcement. It has issued a large number of enforcement rules andguidelines.

1.2 What types of mergers and joint ventures are caught?

Transactions must involve the acquisition of control to be caught and alljoint ventures (JVs) are caught (whether full-function or not).

The following transactions are caught: (i) a merger of undertakings; (ii) oneor more undertakings acquiring control over one or more undertakings byacquiring equity interests or assets; or (iii) one or more undertakings acquir-ing control or able to exercise decisive influence over one or more under-takings by contract or any other means.

2. FILING

2.1 What are the thresholds for notification, how clear are they, andare there circumstances in which the authorities may investigate amerger falling outside such thresholds?

The thresholds for notification are relatively low but relatively clear, and theauthorities can investigate mergers falling outside the thresholds.

The thresholds for notification are as follows:

• the combined worldwide turnover of all parties to the transaction in theprevious financial year exceeded Rmb10 billion ($1.6 billion) and theturnover in the People’s Republic of China (PRC) of each of at least twoparties exceeded Rmb400 million; or

• the combined turnover in the PRC of all parties to the transaction in theprevious financial year exceeded Rmb2 billion and the turnover in thePRC of each of at least two of the parties exceeded Rmb400 million.

The thresholds are relatively low, and because they are defined by referenceto the parties’ turnover, they are relatively clear.

Mofcom has discretion to review transactions that do not meet the notifi-cation thresholds if the transaction ‘has’ or ‘is likely to have’ an effect thatcould ‘eliminate or restrict competition’.

2.2 Are there circumstances in which a foreign-to-foreign mergermay require notification, and is a local effect required to give theauthority jurisdiction?

Foreign-to-foreign mergers and JVs may require notification and there isno local effects test.

Foreign-to-foreign transactions need to be notified if the thresholds are met.In order to meet the thresholds, each of at least two parties are required togenerate turnover in the PRC. Apart from this, there is no local effect test.

2.3 Is filing mandatory or voluntary and must closing be suspendedpending clearance? Are there any sanctions for non-compliance,and are these applied in practice?

Filings are mandatory (if relevant thresholds met), closing must be sus-pended pending clearance and sanctions are enforced in practice for failingto comply.

Mofcom may impose a fine of up to Rmb500,000 for non-compliance withthe filing requirement, and may also impose: (i) the cessation of the imple-mentation of the concentration; (ii) the disposal of shares or assets; (iv) thetransfer of businesses within a given time limit; and, (v) other measures torestore the market situation to that before the implementation of the trans-action.

In the first published decision concerning non-compliance with the filingrequirement, Mofcom imposed a fine of Rmb300,000.

2.4 Who is responsible for filing and what, if any filing fee applies?What are the filing requirements and how onerous are they?

The notification in a merger should be made by all undertakings involvedin the merger. For a transaction effected by other means, the notificationshould be made by the undertaking that will acquire control or will exertdecisive influence. If two or more of the undertakings are subject to a noti-fication requirement, the undertakings may appoint one of the undertakingsto make the notification.

There are no filing fees.

The extent and scope of notification formalities depends on whether theparties can avail themselves of the simple case procedure. The informationrequired in a standard notification form is rather onerous. Parties are ex-pected to provide detailed commercial and economic data and to presentarguments to support that the concentration does not lead to the elimina-tion or the restriction of competition. The disclosures required under theMofcom form are extensive, as the notifying parties must provide copies ofbusiness licences and certificates of their affiliates within the PRC. Where aparty is a foreign entity, a legalised and notarised certificate of incorporationis also required to be submitted.

China

Marc Waha and Hu Shan, Norton Rose Fulbright

www.nortonrosefulbright.com

CHINA

IFLR SURVEY | MERGER CONTROL 201562

CHINA

Where the simple case procedure applies, parties face much less stringentadministrative and disclosure requirements.

3. CLEARANCE

3.1 What is the standard timetable for clearance and is there a fast-track process? Can the authority extend or delay this process?

Standard Phase I clearance takes between six weeks and three months.

The first phase review period lasts up to 30 calendar days, commencingfrom the acceptance of the filing by Mofcom as complete. However, the pe-riod between notification and acceptance of the filing can be unpredictableand may last up to eight weeks or longer. If Mofcom’s review is not completeafter the end of the first phase, it has the discretion to open a further reviewperiod of up to 90 calendar days. Mofcom can extend this period by an ad-ditional 60 calendar days.

The simple case procedure provides no guarantee that the review will be onan expedited basis. However, so far the majority of simple cases were con-cluded within the first phase review.

3.2 What is the substantive test for clearance, and to what extentdoes the authority consider efficiencies arguments, or non-competition factors such as industrial policy or the public interest,in reaching its decisions?

A concentration will be prohibited by Mofcom if it has or is likely to havethe effect of eliminating or restricting competition, unless the parties canshow that the concentration may improve conditions for competition andthat its positive effects on competition significantly outweigh its negativeeffects on competition, or that the concentration is in the public interest.

Industry policy considerations are not clearly spelled out in Mofcom’s im-plementing rules. In practice, Mofcom often consults the authorities incharge of the specific industry relevant to a transaction during its review.

Concerning economic efficiencies, the AML provides that an otherwise pro-hibited transaction may be cleared if the transaction’s positive effects oncompetition significantly outweigh its negative effects on competition.

3.3 Are remedies available to alleviate competition concerns?Please comment on the authority’s approach to acceptance andimplementation of remedies.

Remedies are available to alleviate competition concerns under the AML.

Mofcom has accepted behavioural, structural and hybrid remedies. Theyusually involve divestitures, obligations to grant access or non-discriminatorylicences, obligations on certain commercial behaviours and the hold separatecommitments.

In December 2014, Mofcom imposed a fine on Western Digital for failingto comply with the conditions Mofcom had imposed as part of its clearancein 2012.

4. RIGHTS OF APPEAL

4.1 Please describe the parties’ ability to appeal merger controldecisions – how successful have such challenges been?

Parties who wish to contest Mofcom’s merger review decisions must appealto Mofcom for administrative reconsideration in the first instance, failingwhich the parties can then bring an administrative action to challenge Mof-com’s decision before a Chinese court. To date, there has not been any pub-lished case where such action has been taken.

About the authorMarc Waha is a partner in the antitrust and competition team atNorton Rose Fulbright’s Hong Kong office. He advises clients onemerging antitrust regimes in Asia and on global competitioncompliance issues, multi-jurisdictional merger filings and internationalcartel investigations. He has also advised clients in Europe involvingalleged abuses of dominant position, cartel-like behaviour and state aid.

Marc WahaPartner, Norton Rose Fulbright

Hong KongT: +852 3405 2300E: Marc.Waha@nortonrosefulbright.comW: www.nortonrosefulbright.com

About the authorHu Shan is an associate in the antitrust and competition team atNorton Rose Fulbright’s Brussels office. She advises internationalcompanies in the antitrust and competition areas, particularly inrelation to multi-jurisdictional merger control filings.

Hu ShanAssociate, Norton Rose Fulbright

Brussels, BelgiumT: +32 2 237 61 44E: Shan.Hu@nortonrosefulbright.comW: www.nortonrosefulbright.com