On September 29 2015 the Ministry of Commerce (MOFCOM) issued four penalty decisions on parties that failed to fulfil their merger notification obligations under the Anti-monopoly Law. This marked the second time that MOFCOM has announced penalties on non-filers, following the penalty decision against Tsinghua Unigroup for its failure to notify MOFCOM of its acquisition of RDA Microelectronics in December 2014 (for further details please see "MOFCOM steps up: merger control penalty decisions published for first time").

The following penalties were imposed:

  • Bestv New Media and Microsoft were each fined Rmb200,000 for their failure to submit a merger filing before the establishment of their joint venture.
  • Bombardier Transportation Sweden and CSR Nanjing Puzhen were each fined Rmb150,000 for their failure to submit a merger filing before the establishment of their joint venture.
  • Fujian Electronics & Information (Group) Co Ltd was fined Rmb150,000 for its failure to submit a merger filing before its acquisition of a 35% stake in Shenzhen CHINO-E Communication.
  • Shanghai Fosun Pharmaceutical Industrial Development was fined Rmb200,000 for its failure to submit a merger filing before its acquisition of a 35% stake in Suzhou Erye Pharmaceutical.

Bestv/Microsoft joint venture

Bestv and Microsoft signed a contract on September 17 2013 to establish a joint entity named E-Home Entertainment Development, with an ownership ratio of 51:49, in the Shanghai Pilot Free Trade Zone. The joint venture was established on October 1 2013 and was mainly engaged in the design, development, manufacturing and sale of game entertainment application software.

On January 6 2015 MOFCOM opened its investigation of the deal under the Anti-monopoly Law, following a complaint received in June 2014. After six months of evaluation, MOFCOM determined that the deal had reached the notification threshold prescribed in the Anti-monopoly Law and that the two parties had failed to file with MOFCOM beforehand.

MOFCOM conducted an assessment of the impact of the deal on market competition and concluded that it would not restrict or eliminate competition. Since both parties made supplemental filings after the complaint was filed and actively cooperated during the investigation, MOFCOM imposed fines of Rmb200,000 on each (the maximum monetary penalty being Rmb500,000).

Bombardier Transportation Sweden/CSR Nanjing Puzhen joint venture

On November 3 2014 Bombardier Transportation Sweden and CSR Nanjing Puzhen signed an agreement to establish a joint venture, with an ownership ratio of 50:50, for the manufacture of monorail and automated people-mover cars. Both companies appointed board members and management executives to the joint venture. The joint venture obtained a business licence on November 11 2014 without first notifying MOFCOM.

On December 29 2014, after becoming aware of the possible violation, both parties attempted to make up for their wrongdoing by making a remedy filing. They therefore notified MOFCOM on their own initiative.

Although the joint venture presented no negative impact on competition, the failure to notify MOFCOM of the deal violated the Anti-monopoly Law. As a result, MOFCOM fined the two companies Rmb150,000 each.

Fujian Electronics acquisition of CHINO-E stake

On July 16 2014 Fujian Electronics signed a share transfer agreement with certain shareholders of CHINO-E to acquire a 35% stake in the latter.

On July 31 2014 Fujian Furi Electronics, a company owned by Fujian Electronics through an indirect holding, signed an agreement with all shareholders of CHINO-E to purchase 100% of CHINO-E shares through a non-public offering, and subsequently filed this deal with MOFCOM on August 12 2014. However, an anonymous third party informed MOFCOM during the public notice period that Fujian Electronics had already gained control of CHINO-E through the previous 35% stake acquisition, which should have first been filed with MOFCOM. MOFCOM determined that Fujian Electronics' previous 35% stake acquisition had reached the notification threshold and its failure to notify MOFCOM before completion of the acquisition had violated Article 21 of the Anti-monopoly Law.

MOFCOM evaluated the competitive impact of the transaction and determined that it would not eliminate or restrict competition. It therefore fined Fujian Electronics only Rmb150,000.

Fosun Industrial Development acquisition of Erye Pharmaceutical stake

Fosun Industrial Development's parent company, Fosun Pharmaceutical, initially filed its acquisition of a 65% stake in Erye Pharmaceutical with MOFCOM in December 2014, with Fosun Industrial Development acquiring a 35% stake and Fosun Pharmaceutical's overseas subsidiary taking the remaining 30%.

However, MOFCOM opened an investigation on March 16 2015 and ultimately found that Fosun Industrial Development had in fact completed the acquisition of the 35% stake in Erye Pharmaceutical during the consultation period – before obtaining clearance from MOFCOM.

MOFCOM concluded that the 35% share transaction met the notification threshold, but would not eliminate or restrict competition. Considering that Fosun Industrial Development's parent company, Fosun Pharmaceutical, had filed the merger notification of the 65% stake acquisition with MOFCOM before its completion, MOFCOM fined Fosun Industrial Development Rmb200,000.


The four penalty decisions were published almost one year after MOFCOM's first non-filing penalty. Compared with the fine imposed on Tsinghua Unigroup (Rmb300,000), these four latest penalty decisions seem relatively light, most likely due to the involved parties' more active and cooperative approach. For example, in the two joint venture deals, all involved parties made remedy filings voluntarily. In the two other cases, both Fujian Electronics and Fosun Industrial Development took the initiative to file their acquisition deals with MOFCOM, although they had somewhat twisted the normal course of events and failed to follow the legitimate procedure.

Nevertheless, publishing four penalty decisions in one day sends a strong message to companies attempting to avoid merger notification that MOFCOM is closely monitoring merger controls in China and is determined to enhance enforcement. Although Bestv and Microsoft established their joint venture on October 1 2013, MOFCOM started its investigation of the deal almost one-and-a-half years later in January 2015, following a complaint; this should serve as a warning that non-filers will eventually be punished, no matter how much time has passed. Even if MOFCOM does not pick up on the deal at first, a third-party complaint will usually bring the deal to its attention. Any company attempting to avoid this fully integrated network of supervision should think twice before moving forward.

Interestingly, these four cases feature distinctive origins and timelines. With respect to the two joint venture deals, one commenced after a complaint had been filed with MOFCOM, while the other originated from self-correction measures. For the two acquisition deals, illegal conduct was exposed during the public notice period and the consultation period, respectively.

MOFCOM's decisions on the two acquisition deals could imply that it sees the acquisition of a 35% stake as gaining control over the target. Although whether a company can exercise control over another company is determined based on several factors other than shareholding, a 35% stake may be a crucial factor in merger review cases.

Generally speaking, the involved parties are fortunate, since they incurred only monetary damages, without being compelled to divest or spin off their businesses. However, their unlawful behaviour has dented their reputations. It is unclear whether the involved parties carelessly neglected their filing obligations or wilfully violated the merger filing rules, as the maximum Rmb500,000 fine seems insufficient to deter companies with annual revenues in the billions and big-ticket deals. Time is of the essence in the business world and Rmb500,000 is ultimately a small price to pay when compared with the damage that a lengthy merger review process can inflict on such deals.

Undertakings are advised to be cautious when fulfilling their pre-merger notification obligations in order to avoid penalties and, in particular, reputational damage. However, given that the cost of violating the law is much lower in comparison with the costs associated with potential delays in merger implementation due to the long review process, some enterprises might still opt to take a more aggressive approach by implementing the merger before securing clearance from MOFCOM. As such, a more stringent penalty system should be put in place. Among other measures, the monetary penalty for non-filing should at least be significantly increased, so that companies will truly be mindful and more willing to follow filing procedures accordingly.

For further information on this topic please contact Michael Gu or Bai Chen at AnJie Law Firm by telephone (+86 10 8567 5988) or email ( or The AnJie Law Firm website can be accessed at

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