LLX-FAQ: Competition and Anti-Monopoly
Q1. China's Ministry of Commerce (MOFCOM) has published the Interim Provisions on the Standards for Simple Cases of Concentrations of Operators. What is the purpose of the Provisions?
A1. The Provisions contain the substantive criteria for determining which merger control cases may be treated as simple cases by MOFCOM.
Q2. Which cases will qualify as simple cases according to the Provisions?
A2. According to the Provisions, merger control cases which meet the following criteria will be treated as simple cases:
1. for horizontal mergers: in a same market, the collective market share of all operators concerned in the concentration is less than 15%;
2. for vertical mergers: the market share of each of the operators concerned in the concentration in each of the upstream and downstream markets is less than 25%;
3. for mergers that are neither horizontal nor vertical: the market share of each of the operators concerned in the concentration in each of the markets is less than 25%;
4. for off-shore joint ventures: the off-shore joint venture does not engage in business operations in China;
5. for acquisitions of off-shore targets: the off-shore target does not engage in business operations in China; and
6. for reductions in the number of existing controlling shareholders: the joint venture that is jointly controlled by two or more operators will be controlled by one or more existing operators through the concentration.
Q3. Which cases will be exempted from the consideration of simple cases?
A3. Cases meeting any of the criteria set out above may not be determined as simple cases under the following circumstances:
1. in case of a change from joint to sole control, there is horizontal overlap between the previously jointly controlled entity and the operator who will acquire sole control over the entity;
2. the affected market is difficult to define;
3. the concentration may cause adverse impacts on market entry or technology development;
4. the concentration may cause adverse impacts on consumers or other relevant operators;
5. the concentration may cause adverse impacts on national economic development; or
6. other circumstances where competition may be adversely affected as determined by MOFCOM.
Q4. Under what conditions may MOFCOM revoke a decision to treat a concentration as simple cases?
A4. MOFCOM could revoke its decision if the Cases contain any of the following circumstances:
1. the notifying party conceals important information, or provides false or misleading material to MOFCOM;
2. a third party claims that the concentration has or may have the effect of eliminating or restricting competition, and can provide supporting evidence; or
3. MOFCOM discovers material changes to the transaction or competition in the affected market.
Q5. In April 2013, MOFCOM published the Draft Provisions for comment by the public. Are there big differences between the issued Provisions and the Draft Provisions?
A5. The Issued Provisions are not significantly different to the Draft Provisions. The reference in the Draft Provisions to MOFCOM pursuing the notifying parties' legal liabilities for concealing important information or providing false or misleading information has been removed from the Provisions.
Q6. What is the difference with the EU standards?
A6. The Provisions adopted by MOFCOM are similar to the standards previously applied by EU for simplified procedures before 2014. However, In January 2014, the EU reformed its simplified procedures and expanded the scope for their application. Under the revised rules, the combined market share threshold for horizontal mergers was increased from 15% to 20%, the market share threshold for vertical mergers was increased from 25% to 30%.
Q7. How will the Provisions influence the current merger control review process?
A7.The Provisions only contain the substantive rules for identifying simple cases. Since MOFCOM is not bound by any timeline to review a simple case, it remains unclear to what extent the review period might be shortened.
Q8. Do the Provisions contain the procedural rules for Simple Cases?
A8. No. The Provisions do not include any procedural rules that will apply to the Simple Case. Under MOFCOM’s current review process, a case must first go through a pre-acceptance process. In order to decide on whether a case is simple or not at the pre-acceptance stage, the case review divisions (the Legal Division and the Economic Division) will have to participate in the process.
Q9. What will be the next step for the MOFCOM to take?
A9. It is expected that the MOFCOM will promulgate the procedural rules or guidelines for handling simple cases.
Q10. How was the Antimonopoly Law enforced in China in previous year?
A10. Transparency in the enforcement of the Antimonopoly Law has greatly improved in the last year. However, the degree of transparency in China has not yet reached that of other competition authorities in Asia. The final adoption of the regulation on simple merger cases is likely to contribute to greater transparency in merger control.