On August 12, 2010, the Ministry of Commerce (MOFCOM) convened a press conference to share with the public information relating to its enforcement of the merger control aspects of the Anti-Monopoly Law (AML) in the two years since the AML took effect on August 1, 2008. As one of three AML enforcement authorities, MOFCOM is responsible for reviewing mergers and other transactions among firms (referred to as “concentrations”) that are notified to MOFCOM’s Anti-Monopoly Bureau (AMB) in accordance with requirements under the AML and its implementing regulations. According to AMB Director-General Shang Ming, through June 2010, the AMB had accepted more than 140 notifications of concentrations. Of those, four were subsequently withdrawn by the notifying parties. The AMB had completed its review on 129 notified transactions; the rest remained pending. Collectively, the reviewed transactions have the following notable characteristics:
- Under the AML, review of notified concentrations can take up to 180 days. There are three phases in the review process and the AMB’s review of a given case may be completed during any one of these phases: (i) Phase I – preliminary review (completed within 30 days from the acceptance of the AML notification); (ii) Phase II – further review (completed within 90 days from the date of decision to conduct further review); and (iii) Phase III – extension of further review (not exceeding 60 days). The AMB completed its review of about 80 notified transactions (approximately 60 percent of the total) during Phase I. Review of about 50 transactions (approximately 33 percent) was completed during Phase II. Less than 3 percent of the notified transactions entered Phase III review. Notably, the percentage of cases entering Phase II review is a bit higher than in the US or Europe. Director-General Shang noted that not all cases that entered Phase II review implicated a competition issue; in certain cases it was simply because the review could not be completed within the 30-day preliminary review period.
- A vast majority – about 95 percent – of the reviewed transactions received unconditional clearance. This is slightly higher than the percentage of cases cleared unconditionally by the US and European authorities, which according to Director-General Shang stands at about 93 percent. Five transactions were approved with conditions attached, namely: (i) InBev’s acquisition of Anheuser-Busch; (ii) Mitsubishi Rayon’s acquisition of Lucite; (iii) General Motor’s acquisition of Delphi; (iv) Pfizer’s acquisition of Wyeth; and (v) Panasonic’s acquisition of Sanyo. Coca- Cola’s proposed acquisition of Chinese juice producer Huiyuan was the only transaction prohibited by MOFCOM under the AML since the law took effect.1
- About 62 percent of the notifications involved horizontal concentrations (i.e., concentrations between competitors), which would result in fewer competitors in the market and thus would generally raise more concerns regarding potential impact on competition. Approximately 14 percent of the notifications involved vertical concentrations (i.e., transactions between firms having an upstream-downstream relationship), which have relatively smaller impacts on competition. The remaining 23 percent of notifications involved “hybrid” concentrations, which fall into neither the vertical nor horizontal category, such as transactions involving products with complementary relationships.
- Over 80 percent of the notified transactions involved the manufacturing sector. Separately, about 75 percent involved publicly listed companies.
In response to a query as to whether the AML has been unfairly applied against foreign parties, Director-General Shang provided the following reply. He said there are several reasons that the six transactions that were rejected or subject to certain clearance conditions all involved foreign firms or multinational corporations (MNCs). First, he said that given the generally more abundant capital resources of foreign MNCs, they are more likely to meet or exceed the notification thresholds. As such, there are more notified transactions involving foreign MNCs than domestic companies. Second, despite the recent global financial crisis, foreign MNCs have generally been more active in mergers and acquisitions than Chinese companies. So, there were more transactions involving foreign MNCs subject to notification and review, and a generally higher likelihood that such transactions would be found to raise issues affecting competition. Director-General Shang pointed out that in each of the six transactions that were rejected or conditionally approved, there were specific competition-related concerns – mostly relating to very high market shares – that called for the rejection or imposition of conditions. He further noted that the conditions imposed were proposed by the respective transacting parties, reached after due negotiations with the parties and tailored to address the specific concerns so that they would not adversely affect the transactions overall. As such, in Director- General Shang’s view, suggestions that the AML was unfairly applied against foreign companies were due to a lack of understanding of the underlying facts and circumstances or misinformed speculation.