Introduction

As the largest marketplace and manufacturing base worldwide, China is fertile ground for international M&A activity. Despite the recent trade climate, China has introduced initiatives to further open up and reform its economy. The promulgation of the Foreign Investment Law2 may herald an era in which foreign businesses can navigate in a more level-playing, transparent and predictable business environment.

Since the implementation of the Anti-Monopoly Law (AML) in 2008,3 China has become one of the key competition jurisdictions, with increasing influence on global mergers and acquisitions. In the past 11 years, the Chinese competition authority has reviewed over 2,700 merger filing cases, with yearly case volume exceeding 350 since 2015. Among these cases, more than 70 per cent involve at least one non-Chinese party. From Q3 2018 to August 2019 alone, over 500 mergers have been reviewed, including five conditional clearances (Essilor/Luxottica,4 Linde/Praxair,5 UTC/Rockwell,6 KLA-Tencor/Orbotech7 and Cargotec/TTS8), as well as 13 failure-to-notify cases.

In the past, dealmakers could seek approvals in the United States and the EU, and assume that merger clearance from other jurisdictions was likely to be relatively straightforward. Now, however, the Chinese competition authority has firmly established that it will exercise independent analysis of an international transaction’s competitive effect on the Chinese market, and often imposes separate remedies on the basis of such analysis. Therefore, the ability to manage China competition aspects often significantly impacts the progress and outcome of a global M&A transaction.

Against this backdrop, this chapter deals with the China competition aspects of global M&A from the following perspectives:

  • the Chinese merger filing regulatory framework, including the regulatory body, filing thresholds, process and timeline, fast-track procedure, failure-to-notify and competition assessment and remedies;
  • a review of merger filing cases in China from Q3 2018 to the present; and
  • practical notes for the effective management of China merger filing for global M&A transactions.

Regulatory framework of merger control in China Competition authority

China overhauled its competition regime in 2018. The State Administration for Market Regulation (SAMR) took over merger control responsibility from the Ministry of Commerce (MOFCOM) as from 10 April 2018. SAMR also took over the antitrust enforcement responsibilities (on joint and unilateral conducts) from the National Development and Reform Commission (NDRC) and the Sate Administration for Industry and Commerce (SAIC).

Triggers and thresholds

A merger notification obligation is triggered in China when an acquisition of control occurs, and the turnover threshold is met.

An acquisition of control occurs in any of the following events:

  • a merger;
  • an undertaking gains control of another undertaking through an acquisition of shares or assets; or
  • an undertaking gains control or the power to exert a decisive influence over another undertaking, by way of contract or via any other means.

In accordance with the Guiding Opinions on Notification of Concentration of Undertakings (the Guiding Opinions),9 ‘control’ includes sole control and joint control, which shall be decided by assessing various factors such as:

  • purpose of the transaction and future plan;
  • shareholding structure and change thereof;
  • voting items and mechanism of the shareholders' meetings;
  • composition and voting mechanism of board of directors or board of supervisors;
  • appointment, removal and other matters concerning senior executives;
  • relationships between shareholders and directors, such as voting proxy and persons acting in concert; and
  • significant commercial relationship, cooperation agreements or other arrangements.

The turnover threshold is met when in the preceding financial year:

  • the combined worldwide turnover of the parties to the transaction exceeded ¥10 billion, and the Chinese turnover of each of at least two of the parties to the transaction exceeded ¥400 million; or
  • the combined PRC turnover of the parties exceeded ¥2 billion and the Chinese turnover of each of at least two of the parties to the transaction exceeded ¥400 million.

For turnover calculation, the Guiding Opinions provide that ‘turnover includes revenue received by the undertaking concerned through sale of goods and provision of services in the preceding financial year, net of applicable taxes and surcharges.'10 Such turnover should be calculated at the merger parties’ group level. Further, the Guiding Opinions also limit the ‘PRC turnover’ to sales where the buyer is located within the territory of PRC.11

Review process and timeline

A merger review process normally involves the following stages:

Stage

Duration

Note

Preparation of filing materials

Case-specific

This varies depending on the number of relevant markets and the timeliness and completeness of relevant parties’ responses to information requests

Pre-docketing review

3–12 weeks

This varies depending on the case nature and SAMR’s caseload

Phase I review

30 days

Most simple cases are cleared within this stage

Phase II review

90 days

Most normal cases are cleared by the middle of this stage

Extended Phase II review

60 days

This is usually only for cases with complex issues or significant competition concerns

The review timeline can also be extended by the voluntary resubmission of the merger notification by the parties (the ‘pull-and-refile’ step), which resets the clock. SAMR, in some cases, may suggest or indicate that it expects certain remedial conditions that the parties are not ready to accept yet, and at the same time, the Extended Phase II review period is about to expire. In that situation, if the parties wish to keep negotiations with SAMR open, they can voluntarily withdraw their application on certain technical grounds, and then immediately resubmit it, starting again at Phase I.

Fast-track procedure

A common perception for China merger filing is that it can easily become a deal bottleneck owing to the relatively low threshold, the relatively lengthy review period and sometimes uncertain outcome. However, this is not always the situation, in particular if a deal qualifies as a simple case.

A fast-track procedure, known as the simplified procedure, was adopted as from 12 February 2014. From 2015 through August 2019, the Chinese competition authority has cleared around 80 per cent of the cases under simplified procedure. The average review duration of such simple cases from 2015 to August 2019 is 22 days.

There are three qualifying criteria for the simplified procedure: lack of China market nexus, insignificant market share and change in joint control. Specifically:

  • Lack of China nexus: a merger lacking China nexus in either of the following scenarios qualifies as a simple case:
    • participating undertakings establishing a joint venture outside China. The joint venture concerned will not be economically active in China; or
    • participating undertakings acquiring equity or assets of an overseas enterprise. The overseas enterprise concerned is not economically active in China.
  • Insignificant market share: to satisfy the insignificant market share criterion, all of the following three conditions must be met:
    • the combined market share of all participating undertakings in the same relevant market is smaller than 15 per cent;
    • for participating undertakings having upstream or downstream relationship, their respective market share in the upstream or downstream market is smaller than 25 per cent; and
    • for participating undertakings that are neither in the same relevant market nor having any upstream or downstream relationship, their respective market share in each market associated with the transaction concerned is smaller than 25 per cent.
  • Change in joint control: for a joint venture under joint control of two or more undertakings, the post-concentration control of the joint venture concerned will vest in one or more of the foregoing undertakings. It will generally qualify as a simple case, except when such undertaking and the joint venture are competitors in the same relevant market.

Our statistics show that more than 85 per cent of the simple cases are qualified based on the market share criterion; about 10 per cent of cases are simply offshore deals with no or limited China nexus; and very few cases are qualified as simple cases based on the change in joint control criterion.

Failure-to-notify

Under the AML, an unnotified concentration refers to a concentration that meets the notification thresholds but is consummated without first receiving clearance from the competition authority. Once a failure-to-notify is found, the following may occur:

Monetary fine and behavioural sanctions

If the SAMR finds that a party has completed a notifiable concentration without obtaining a clearance beforehand, the SAMR can impose a fine of up to ¥500,000 and order any of the following:

  • cessation of the transaction (where it has not been completed);
  • divestiture of the relevant shares or assets;
  • transfer of a business; or
  • restoration of pre-merger conditions by any other means.

In all the published cases, the Chinese competition authority concluded that the transactions in question would not result in any competition concern, and accordingly all those penalties were monetary, with the amounts ranging from ¥150,000 to ¥400,000. So far, no deal suspension or rewind order has been issued.

Prolonged merger review process

If the preliminary investigation determines that the transaction should have been notified, the investigation enters a second phase whereby the parties must notify the merger within 30 days and the competition authority has 180 days to conduct an assessment of the transaction on receipt of a complete notification. This results in a significantly prolonged merger review process beyond the usual time limits. The longest review period of all the published sanction decisions for failure to notify is 465 days, and the average review period of those cases is around 250 days.

Reputational risk

While the monetary penalty for failure-to-notify is limited, it affects the reputation of the party involved, particularly when it is a public company. The administrative sanction decision on failure-to-notify will be posted on the competition authority’s web page for a non-fixed term. This will leave a non-compliance record and may result in a stakeholder’s closer scrutiny on the company’s business dealings. The case handlers may also become more cautious and conservative in any merger review process involving such company.

Potential implication to the subsequent filings

If a prior failure-to-notify instance is uncovered during review of a new merger, it may cause delay to the merger review and approval of such new merger.

Enforcement efforts against failure-to-notify are aided by several informational channels. For instance, the notification form requires disclosure of mergers in the relevant market in which the applicant has been involved for the past three years. In addition, media monitoring, reporting by local regulators or industry regulators and whistle-blowing (note that a whistle-blower does not need to establish standing) also increase the risk exposure of a failure-to-notify.

Competition assessment and remedies

Competition assessment is at the heart of a merger review, and the notifying parties need to submit an assessment of the merger’s competitive impact. When assessing whether a concentration would result in horizontal, vertical or conglomerate effects (the ‘theories of harm’), SAMR will examine a number of factors, including market shares, level of concentration, barriers to market entry, impact on consumers, technological advancement and national economic development. The theories of harm adopted by the Chinese competition authority are generally in line with those adopted in the EU and the United States, except that China takes into account the additional factor of impact on technological advancement and national economic development, and, where the relevant market is defined as global, tends to focus its assessment on the China market. 

While they may exchange views with authorities in other major jurisdictions in determining remedies in some of the global deals, Chinese competition officials tend to conduct independent in-depth and China-specific investigations, including sophisticated economic analysis. A global transaction unconditionally cleared by the EU or the US authorities may still be challenged in China (eg, Orbotech/KLA-Tencor (2019)) if SAMR determines that the transaction will result in competitive harm on the China market.

Similar to other major jurisdictions, if a proposed merger raises significant competition concerns, SAMR can impose conditions (or remedies). These remedies, which may be structural, behavioural or hybrid, must be sufficient to remove or mitigate the competition concerns, and should be practically feasible.

Structural remedies aim at maintaining or potentially enhancing the level of competition on the relevant market, including:

  • divestiture of part of an undertaking’s business to an independent party, thereby reducing the post-merger entity’s market power (‘divestiture’);
  • refraining from seeking to increase its market power through additional acquisition or capacity expansion (‘standstill commitment’); and
  • severance of link with a competitor through measures such as waiving of rights associated with minority stake in a competitor (‘removal of links with competitors’).

Structural remedies are adopted mainly in cases of horizontal concentrations, and in general divestiture (especially the transfer of a controlling stake in a viable stand-alone business to a single competitor) is the best way to eliminate competition concerns resulting from products overlaps. If the merger will result in the merged entity having a fairly high market share in a concentrated market, a combination of divestiture and standstill commitment can be used; and for a merger in an industry where market concentration level is relatively low, standstill commitment is usually adopted.

Behavioural remedies focus on elimination of barriers to entry into the market, namely, in the form of access to patents, essential facility, licensing of intellectual property rights or conclusion of distribution agreements (or termination of existing exclusive ones). Behavioural remedies are considered mainly in cases of conglomerate and vertical mergers, where structural remedies might not be available or appropriate.

Compared to behavioural remedies, structural remedies have a more immediate and lasting effect, and are much easier to control and monitor in terms of implementation. Accordingly, structural remedies are the preferred type. Nevertheless, in cases where structural remedies are not feasible, commitments relating to the future behaviour of the merged entity may be acceptable remedial measures if their effects are comparable to structural remedies.

Hybrid remedies are combinations of structural and behavioural remedies in a single case. Such remedies usually appear in cases involving more than one type of competition concern (eg, horizontal plus conglomerate concerns), to ensure sufficient mitigation of competition concerns in all relevant markets involved in the case.

Interestingly, the Chinese competition authority appears to be more receptive to behavioural remedies in both horizontal and non-horizontal mergers compared to its counterparts in the EU and United Sates – 18 out of the 41 conditionally cleared and two blocked cases as of August 2019 involve non-horizontal concerns, and 3112 out of the 41 involve behavioural remedies. Even in pure horizontal cases, if the merger parties believe a typical structural remedy such as divestiture is overly onerous but can live with a more moderate alternative such as hold-separate plus certain behaviour commitments, the Chinese authority may be more receptive to clear the cases with such hybrid remedies.

Review of recent merger filing cases Overview

As noted above, SAMR took over merger control responsibility from MOFCOM as of April 2018. Following this reorganisation, on 29 September 2018, SAMR re-promulgated a series of merger filing-related rules inherited from MOFCOM, without changing the substance. Those rules include the Guiding Opinions on Notification of Concentration of Undertakings, Documentation Guidelines for Notification of Concentration of Undertakings, Guiding Opinions on Notification of Concentration of Undertakings for Simple Cases, and Guiding Opinions on Regulating the Case Name for Notification of Concentration of Undertakings.

From Q3 2018 to August 2019, SAMR closed 514 merger filing cases, including five conditionally cleared cases. Among these cases, 411 (approximately 80 per cent) were notified as simple cases, with an average review period of 16 days.

Statistics also show that SAMR is strengthening its enforcement efforts against non-compliance. Probes on failure-to-notify have become increasingly active in recent years; as of August 2019, 13 out of the 38 published sanctions were issued since Q3 2018.

Conditionally cleared cases

From Q3 2018 to August 2019, SAMR conditionally cleared five deals, including, Essilor/Luxottica, Linde/Praxair, UTC/Rockwell, KLA-Tensor/Orbotech and Cargotec/TTS, with an average review period of 326.8 days. All of these involved the ‘pull-and-refile’ procedural step, with Linde/Praxair doing so twice. These five cases were good illustrations of SAMR’s adoption of the independent analytical approach: three were conditionally cleared after receiving unconditional clearances in other major jurisdictions; the other two were subject to certain China-specific conditions. The table below provides an overview of these cases. Also see below for more details.

Case

Theory of harm*

Remedies

H

V

C

Structural

Behavioural

Essilor/Luxottica

N/A

No tying

Supply commitment

Non-exclusion

Non-discrimination

No sales below cost

Report transactions

Linde/Praxair

 

 

Divestiture (including transfer of contracts)

Provide assistance to buyers at fair and reasonable prices

UTC/Rockwell

 

Divestiture

No tying or unreasonable terms

Status quo commitment

KLA-Tencor/Orbotech

 

N/A

Supply commitment

Non-discrimination

No tying

Information protection

Cargotec/TTS

 

 

N/A

Hold-separate

Information firewall

No price rising

Supply commitment

*      H: horizontal; V: vertical; C: conglomerate.

 

Essilor/Luxottica

Essilor, a French company specialised in the eyecare industry, and Luxottica, an Italian company specialised in the eyewear industry, proposed to merge in 2017. The parties made the filing with MOFCOM in May 2017. The case was officially docketed on 17 August 2017 and cleared on 25 July 2018. The case involved horizontal overlap, vertical relationship and complementary relationship in terms of ophthalmic lenses, frames, sunglasses and retail of ophthalmic products. Although the transaction was unconditionally cleared in the United States and EU and other jurisdictions (except for Turkey), SAMR, based on its assessment of the impact on Chinese markets, concluded that the transaction raised competition concerns (horizontal effect, vertical foreclosure effect and conglomerate effect) in several sub-segments of the aforesaid markets. On this basis, SAMR finally approved the case with six behavioural remedies.

Linde/Praxair

Linde, based in Germany, and Praxair, based in the United States, are both companies active in the industrial gas sector. Linde proposed to acquire Praxair in 2017 and filed with MOFCOM in August 2017. The case was docketed on 29 September 2017 and cleared on 30 September 2018. The parties were found to have overlap in 56 industrial gas markets and have a vertical link in eight sets of markets. SAMR determined the transaction to raise horizontal concerns in several markets and imposed a hybrid of structural and behavioural remedies. Different assets are required to be divested in China from those required by the United States and the EU.

UTC/Rockwell

UTC, a US company in the aerospace sector, proposed to acquire all the shares of Rockwell (also active in the aerospace industry) in 2017. The parties made the filing with MOFCOM in November 2017. The case was officially docketed on 13 December 2017 and cleared on 23 November 2018. UTC and Rockwell were found to have overlap or complementary relationships in several categories of aerospace components. The geographic scope for all of the relevant products is global. The case was conditionally cleared in the EU and the United States with structural conditions based on the horizontal overlaps. However, in China, SAMR found the transaction had both horizontal and conglomerate effects, and approved it with a hybrid of structural and behavioural remedies.

KLA-Tencor/Orbotech

KLA, a US company in the semiconductor industry, proposed to acquire Orbotech, a company established in Israel, in 2018. The parties notified SAMR in April 2018. The case was officially docketed on 26 June 2018 and cleared on 17 April 2019. The parties were found to have vertical and complementary relationships in terms of process control equipment, semiconductor deposition equipment and semiconductor etch equipment. SAMR found that KLA’s strong market power in the process control equipment market would give rise to vertical and conglomerate effect, and imposed four behavioural remedies.

Cargotec/TTS

Cargotec, a Finnish company, whose subsidiary MacGregor involved in this transaction engages in ocean transportation, proposed to acquire TTS, a Norwegian company engaged in hatch covers, roll-on equipment, etc, and merge the latter with MacGregor. The parties notified SAMR in June 2018. The case was docketed on 26 July 2018 and cleared on 5 July 2019. Before SAMR’s decision, this case was unconditionally cleared in Germany and Korea. The parties were found to have overlap in five markets and the transaction would likely to have a negative effect on three. SAMR finally approved the case with a quasi-structural remedy (hold-separate) and a number of behavioural remedies. It is noteworthy that one behavioural remedy required Cargotec to refrain from refusing to supply or restricting the supply of hatch covers, roll-on equipment for merchant ships, and cargo lifters to Chinese customers.

These recent conditionally cleared cases echo the authors' observation that, compared to its counterparts in the EU and the United States, SAMR is more receptive to behavioural remedies to address non-horizontal effects. They are also good illustrations of China’s increasing influence on global M&A deals in terms of both the outcome and the deal closing timeline.

Failure-to-notify cases

From Q3 2018 to August 2019, SAMR published 13 failure-to-notify sanction decisions, with an average formal investigation period of approximately 241 days, although all were found to have no competition concern. Among these cases, seven involved at least one non-Chinese party.

In connection with Linde/Praxair, a total of four failure-to-notify cases involving Linde or Praxair were initiated and resulted in penalty decisions. It is possible that such non-compliance records were discovered during the review of Linde/Praxair and such records in turn impacted the timeline of the Linde/Praxair case, which was cleared only after the second ‘pull-and-refile’.

It is not uncommon for a failure-to-notify case to significantly impact the progress of another transaction involving the same party or parties. For example, the YMCI/Chengdu Huizhan13 merger filing was not docketed until 28 August 2018, after their failure-to-notify case was closed on 22 August 2018.

Practical steps to effectively manage China merger control

As discussed above, the Chinese competition authority is increasingly playing an active role in global deals. Those dealmakers who understand China’s regulatory dynamics and practice and proactively manage their China merger filings will gain an edge in winning and closing deals. Set forth below are some practical notes for global M&A transactions.

Whether to seek pre-filing consultation with SAMR

SAMR offers a pre-filing consultation mechanism whereby parties may submit questions on substantive or procedural issues and request a consultation. SAMR will then arrange an in-person meeting with the parties, typically providing oral advice only. The process usually takes one to three weeks.

The process allows parties to gain more clarity and to some extent pre-warns the relevant SAMR officials about a forthcoming notification. However, the process also alerts SAMR to a proposed deal. The party must reveal its identity and ask actual and relevant questions; no anonymous consultations or hypotheticals are allowed in such consultations. If an officer suggests or requests that the parties file, it leaves the parties little choice but to file.

Prepare a filing as early as is practicable

The notification shall be made after the definitive transaction documents are executed, once the requisite notification documents and materials are in order, but no later than the consummation of the proposed merger. Given the significant lead time for information collection and notification materials preparation, the best practice to speed up the merger review process is to get a head start. By completing most of the groundwork in advance of the execution of the merger documents, notifying parties can submit the merger notification filing soon thereafter. In a number of cases, with the substantive analysis more organised and prepared, the parties received limited supplemental questions and the response time was shortened, thereby substantially shortening the pre-docketing time and post-docketing review period.

Weighing the options of seeking a simplified procedure

Once a merger filing obligation is triggered, the merger parties can assess whether they are eligible to pursue a simple case filing. If the notifying party does not apply, SAMR will not initiate a simplified review process on its own, even if such case substantively qualifies as a simple case.

Compared with a normal notification, the simplified procedure removes many substantive information requirements. Generally, the simplified procedure is more attractive to transactions involving low market share or shares, with readily available supporting market data. Compared to the normal procedure, which usually takes two to three months or even longer, a simple case revew-cycle is substantially shortened – generally within the 30-day Phase I review period upon formal docketing.

Despite the benefits of lighter information request and shorter review period, the parties need to weigh the following side-effects when deciding whether to apply for a simplified procedure:

Information disclosure concern

A simple case requires a 10-day public announcement upon case docketing, which is designed to allow comments from the public, primarily various stakeholders in the industry. Therefore, for deals with high sensitivity or confidentiality concerns (eg, hostile takeovers or private deals), this may not be the best approach owing to the concern on publicity.

Risk of disqualification and prolonged review

Owing to potential third-party challenge under the public announcement regime, a simple case runs the risk of being disqualified during the review process. Once the case is disqualified, it takes even more time and resources to re-assemble the notification materials for normal procedure, ultimately delaying the review process. For example, it took 278 days (even longer than the ordinary 180-day review period) to secure the clearance of Sanhuan/Hitachi Metals (2015),14 which was originally filed as a simple case but was reported to be disqualified owing to a third party’s challenge relating to Hitachi’s involvement in another AML litigation in China.

Dealing with possible delaying factors in merger review

There are a number of issues that may delay the merger review process, as seen below.

Profile or value of the transaction

For high-profile or value transactions, SAMR tends to exercise more caution in reaching a decision, and may take time to observe how other merger control authorities in major jurisdictions (such as the EU and United States) are likely to rule on the transaction.

Complexity of the transaction

For complex transactions (for instance, there are multiple parties who are acquirers) the review process tends to take longer.

Number and sophistication of products covered by the transaction

If the transaction concerns a large number of sophisticated products, more time and effort will be required to examine them, and more stakeholders will need to be consulted. There is also an increased likelihood that SAMR will ask the notifying party to submit additional materials both before the notification is officially docketed, and during the actual review phase or phases.

Level of competition concerns

Significant competition concern is the key factor in delaying the merger clearance in most cases. If there is already a high degree of concentration in the relevant market, or if the combined market shares of the parties will be significant, there is a high likelihood that competitors, suppliers, customers or an industry association will voice concerns or raise objections, and sometimes hearings need to be scheduled to discuss the competition issues and possible remedies. Where the transaction is determined to eliminate or have a restrictive effect on competition, a remedial plan has to be negotiated with SAMR.

Stakeholders’ comments

In response to solicitation of comment, or by proactively submitting comments, stakeholders (eg, competitors, trade associations, customers, suppliers and other authorities) may raise concerns or file complaints to SAMR. While these comments or objections may not necessarily have competition-related merit (eg, industrial regulatory perspective or other non-compliance issues may be factored in), SAMR has to handle them as a procedural matter, and this process can take months and substantively prolong the review period.

While the above factors are out of the control of the merger parties, proactive efforts such as those below often help to smooth out the merger notification and review process.

Timely coordination with counsel across jurisdictions

For cases involving multiple jurisdictions, it is important to coordinate, and align, with counsel in other jurisdictions in preparing the filing materials. SAMR is interested to learn about progress and (remedy) discussions in other major jurisdictions, and is likely to consult with other jurisdictions regarding competition issues during the review process.

Effective outreach with stakeholders

As mentioned above, stakeholders’ comments can impact the timing and outcome of an SAMR review. For high-profile cases, it is advisable to engage outreach efforts with important stakeholders, including government authorities, trade associations and key suppliers or customers to encourage timely and appropriate feedback and monitor the process.

Addressing China-specific issues

China has heightened scrutiny on strategically key industries (eg, ICT, healthcare, agriculture), and may expect behavioural or non-typical remedies (eg, hold-separate) for China-specific concerns. It is important to understand and effectively deal with such differences in competition analysis and remedy approaches to better manage the filing process in China.

Staying vigilant against gun-jumping

As mentioned above, the AML prohibits a merger from consummation without official merger clearance. While any assessment of AML risks in pre-merger activities is inherently fact-specific, as a rule of thumb, integration planning is generally permissible while implementation is not. In order to manage the risk of gun-jumping, the merger parties shall continue to act as separate and independent companies until the transaction is closed and shall avoid coordinating market actions, transferring operational control or prematurely integrating the companies before merger clearance.

Competitive information exchange before the closing will be deemed likely to lead to collaboration or coordinated market activities. Such collaboration or coordination, on one hand could be viewed as the implementation activity of a merger; on the other hand, if the parties are competitors, such exchange could potentially be viewed as a cartel activity. Thus, all pre-closing information exchanges must be closely monitored and controlled to mitigate the potential AML risk exposures. In particular, competitively sensitive information (such as price, cost, volume, inventory, trading conditions, targeted customers, sales markets, restrictions on new technologies and new products, etc) should be treated with care and safeguard measures.