Merger control

The State Council’s 2008 Regulation on Notification Thresholds for Proposed Concentrations of Undertakings implemented the merger provisions of the Antimonopoly Law. Since the adoption of the regulations, the State Council has reviewed over 100 merger transactions, a majority of which have been cleared. Only one transaction was denied outright, while five others were allowed with conditions attached.    

A transaction must be reported to MOFCOM when it constitutes a “concentration” as defined in Article 20 of the AML and when the parties to the transaction meet the turnover thresholds set forth in the Notification Regulation. Article 20 defines concentration as a merger, acquisitions of control by means of equity or asset purchase, or acquisitions of decisive influence by contract or any other means. Even if neither condition is met, MOFCOM may nonetheless require notification of any transaction which it considers may have the effect of excluding or limiting competition.

Once MOFCOM is notified of the merger, they have 30 days to conduct a preliminary examination of the concentration and may determine to conduct further investigation. If an in-depth review is found to be necessary, MOFCOM is granted an additional 150 days. In practice, the preliminary examination often takes longer than 30 days. MOFCOM is not required to begin review until they have received all relevant information and often will delay before confirming that the notification is complete.

Failure to notify MOFCOM of a transaction may result a reversal of the transaction and heavy fines of up to RMB 500,000. International parties must be aware of China’s merger control regime in order to avoid conditions or denial when dealing with mergers and acquisitions in China.