February 2015
Practice Group(s):
What is Simplified under Anti-Monopoly Filing
Procedures for Simple M&A Cases?
By Amigo Xie, Cecillia Dai, and Aqua Huang
Corporate/M&A
Antitrust,
Competition and
Trade Regulation
The Ministry of Commerce in China (“MOFCOM”) has promulgated a series of
implementation regulations as an effort to improve the enforcement of the Anti-Monopoly
Law (“AML”), among which two regulations specifically relate to simplified premerger filing
procedures: Announcement No. 12 [2014] of the MOFCOM—Interim Provisions on
Standards Applicable to Simple Cases in Concentration of Business Operators (the “Interim
Provisions,” 《关于经营者集中简易案件适用标准的暂行规定》 in Chinese) promulgated on
February 12, 2014, and the Tentative Guidelines on Filing of Simple Cases in Concentration
of Business Operators (the “Opinions,” 《关于经营者集中简易案件申报的指导意见
（试行）》), together with simplified notification form and “public notice” form templates
(collectively, “Forms”) on April 18, 2014. The Opinions and Forms provide guidelines for
implementing the Interim Provisions. The Interim Provisions and Opinions became effective
from their dates of publication, respectively, and were welcomed as a positive development
in streamlining premerger filing procedures.
This alert examines the Interim Provisions and Opinions, discusses in what ways the current
standard review process is simplified, and practical recommendations to apply for going
through such simplified premerger filing procedure.
Qualified Simple Cases, Exceptions and Revocation
The Interim Provisions adopt both “market share thresholds” and non-market share tests to
determine simple cases. Similar to the anti-trust laws of other countries, the “market share”
test in the Interim Provisions is one of the most important indexes to assess whether an
enterprise has a dominant position in a certain market. MOFCOM set three thresholds: for
enterprises in the same relevant market, in an upstream-downstream market relation and in
different markets that are neither relevant nor upstream-downstream. The non-market share
test is focused on whether the transaction will affect the Chinese economy. The
transaction’s parties must specifically apply for simple case treatment if they would like to
use the simplified procedure and they meet the qualification requirements. In total, there are
six qualification requirements and six exceptions based on market definition, competition,
entry, technological progress, consumers and national economic effect.
What is Simplified under Anti-Monopoly Filing Procedures for Simple
M&A Cases?
Details of the qualifications and exceptions are as follows:
Normal Cases 1
i.
ii.
Simple Cases 2
The total amount of the
i.
global turnover realized by
all business operators
participating in the
concentration exceeds
RMB10 billion during the
ii.
previous financial year,
with at least two business
operators to the relevant
transaction achieving a
Chinese turnover of more
than RMB400 million each
during the previous
financial year; or
iii.
The total amount of the
Chinese turnover realized
by all business operators
participating in the
concentration exceeds
RMB2 billion during the
previous financial year,
with at least two business
operators achieving a
Chinese turnover of more
than RMB400 million each
during the previous
financial year.
iv.
v.
vi.
The total market share of all
business operators participating
in the concentration is less than
15% in the same relevant
market;
When an upstream-downstream
relationship exists among the
business operators participating
in the concentration, and the
market share of such business
operators both upstream and
downstream is less than 25%;
When the business operators
participating in the concentration
are neither in the same relevant
market nor have any upstreamdownstream relationship, and
their market share in each
market relevant to the
concentration is less than 25%;
When the business operators
participating in the concentration
intend to establish a joint
venture outside Chinese
territory, and the joint venture
will not engage in any economic
activities within China;
When the business operators
participating in the concentration
intend to acquire the equity or
assets of an overseas
enterprise, where the overseas
enterprise does not engage in
economic activities within China;
or
Exceptions to Simple Cases 3
i.
When a joint venture, jointly
controlled by two or more
business operators, will be
controlled by one of the
existing business operators
after the concentration, and
this business operator and
the joint venture are
competitors in the same
relevant market;
ii.
When it is difficult to define
the relevant market
involving the concentration of
business operators;
iii.
When the concentration of
business operators may
have an adverse effect on
market entry or
technological progress;
iv.
When the concentration of
business operators may
have an adverse effect on
consumers and other
business operators;
v.
When the concentration of
business operators may
have an adverse effect on
national economic
development; or
vi.
When MOFCOM’s opinion is
that the concentration of
business operators may
otherwise have an adverse
effect on market
competition.
When a joint venture, controlled
jointly by two or more business
operators, will be controlled by
one or more of the existing
business operators after the
concentration.
1
Article 3 of the Provisions of the State Council on the Standards for Declaring Concentration of Business
Operators (国务院关于经营者集中申报标准的规定) issued by the State Council on August 3, 2008, in effect on
the same date.
2
Article 2 of the Interim Provisions.
3
Article 3 of the Interim Provisions.
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What is Simplified under Anti-Monopoly Filing Procedures for Simple
M&A Cases?
MOFCOM still has broad discretionary powers in determining where a transaction qualifies
as a “simple transaction.” The Interim Provisions also remain unclear on determining a
relevant market and potential adverse effects which may disqualify a transaction from being
considered a “simple” case. In practice, MOFCOM may also conduct certain procedural
examinations before officially accepting a simplified case filing. The Opinions provide an
opportunity, prior to an official filing, for the business operators to consult with the Antimonopoly Bureau of MOFCOM regarding whether a transaction could be deemed a simple
case, and on other issues related to the simplified filing procedures, in order to expedite a
simplified filing. This is not mandatory, and the parties have discretion as to whether or not to
consult with the Anti-monopoly Bureau.
Notably, a simple case may lose that status if: (i) the notifying party conceals important
information or provides false or misleading materials; (ii) a third party claims that the
concentration has, or may have, the effect of restricting or eliminating competition, and the
party can provide relevant evidence; or (iii) MOFCOM discovers material changes to the
transaction or the competition status in the relevant market. That is to say, transaction
parties that elect to pursue the simplified procedure may run the risk that MOFCOM rejects
their simple case application, or later revokes their simple-case qualification decision. Under
such circumstances, the transaction’s parties will have to re-file their application as a normal
case, and start the longer standard filing procedures, which can include a 30-day Phase 1
preliminary review; a 90-day Phase 2 further review; and 60-day Phase 3 extended review, if
MOFCOM thinks necessary; or 180 days total.
Benefits of the Simplified Application Process
The Opinions and the Forms allow the parties to provide fewer documents and less
burdensome information in comparison with normal cases. The following documents and
information, for instance, are not required in simple cases: notarized documents submitted in
the past three years, business licenses and approval certificates of Chinese affiliates, the
names and contact information for major suppliers and customers, detailed descriptions of
the supply and demand structure of the market, the transaction’s expected efficiencies, an
analysis of entry barriers and entry events, cooperation agreements relating to the relevant
markets, and the parties’ scale and competition in other markets.
Further, the Opinions introduce a public announcement mechanism, whereby MOFCOM
publishes details 4 of a simple case, after they confirm that the application’s documents are in
order, and invites all interested parties to comment within a 10-day period. It is worth noting
the Opinions do not note how quickly MOFCOM issues an approval after the public
announcement period; however, the simplified cases published on MOFCOM’s official
website are good examples of how much time is saved in reality.
MOFCOM has implemented the Interim Provisions and relevant regulations to simplify the
approval procedures relating to qualified cases after the adoption of the simplified procedure.
The first public notice, published on May 22, 2014,5 shows that a leading motor car company
sought to acquire another motor company’s 50% stake of a jointly owned offshore power
systems company and filed the acquisition as a simple case with MOFCOM. The public
4
Details of public notices regarding simple cases application are available at the website of Anti-Monopoly
Bureau of MOFCOM at: http://fldj.mofcom.gov.cn/article/jyzjzjyajgs/.
5
See public announcement available at:
http://fldj.mofcom.gov.cn/article/jyzjzjyajgs/201405/20140500597172.shtml.
3
What is Simplified under Anti-Monopoly Filing Procedures for Simple
M&A Cases?
announcement expired on May 31, 2014, and on June 9, 2014, MOFCOM granted
unconditional approval for the acquisition 6, completing its review in only nine days after
public announcement. By the end of 2014, MOFCOM had approved 67 AML simplified
premerger filing cases, with an average approval period of 18 days. The quickest approval
came in the case filed by a leading aviation company and SIA Engineering Company to form
a fleet-maintenance service joint venture located in Singapore. The parties obtained
unconditional approval within five days following the public announcement procedure 7. In
another case, it took 82 days for the approval for an acquisition of a Shenzhen
telecommunication company by Fujian Furi Electronics Co., Ltd., the longest review time so
far8. Again, it is noteworthy that all the abovementioned approval time periods are calculated
starting from the completion date of the public announcement procedure, but the time spent
in preparation, submission and the public announcement are not included. The approval
results demonstrate that, despite the varied review times, the simplified procedures have
shortened the process when compared to normal cases’ 180 days.
Conclusion and Recommendation
The Interim Provisions and Opinions, as well as the implementation practices, all represent
one positive improvement in China’s AML enforcement. While there are still some
uncertainties in the exceptions to the simplified premerger filing procedures, the
documentation requirements are lighter and the timing for approval is shorter than in normal
cases. If a transaction’s parties plan to file a simple case with MOFCOM, to mitigate
uncertainties and facilitate approval, it would be advisable that they use the consultation
procedure before making an official application.
Authors:
Amigo Xie
amigo.xie@klgates.com
+86.21.2211.2080
Cecillia Dai
cecillia.dai@klgates.com
+86.21.2211.2082
Aqua Huang
aqua.huang@klgates.com
+86.21.2211.2089
6
See public announcement available at:
http://fldj.mofcom.gov.cn/article/jyzjzjyajgs/201410/20141000759180.shtml; and Item 16 of list of cases
approved without imposing restrictive conditions in the fourth quarter of 2014:
http://fldj.mofcom.gov.cn/article/zcfb/201501/20150100859173.shtml..
7
See public notice available at: http://fldj.mofcom.gov.cn/article/jyzjzjyajgs/201408/20140800705650.shtml.
8
See public announcement available at:
http://fldj.mofcom.gov.cn/article/jyzjzjyajgs/201409/20140900730611.shtml; and Item 53 of list of cases
approved without imposing restrictive conditions in the fourth quarter of 2014:
http://fldj.mofcom.gov.cn/article/zcfb/201501/20150100859173.shtml.http://fldj.mofcom.gov.cn/article/zcfb/20
1410/20141000755915.shtml.
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What is Simplified under Anti-Monopoly Filing Procedures for Simple
M&A Cases?
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