On February 11, 2014, China’s Ministry of Commerce (“MOFCOM”) released the long-awaited Tentative Provisions on the Standards Applicable to Simple Cases of Concentration of Business Operators (the “Tentative Provisions”), which took effect on February 12, 2014. The Tentative Provisions set out the standards applicable to concentration transactions subject to a streamlined antitrust review process, the circumstances under which a concentration transaction cannot be deemed as a “simple” case, and the circumstances under which MOFCOM may revoke the “simple case” recognition.

Standards for the Recognition of Simple Cases

The Tentative Provisions set out standards for the recognition of a simple case, including:

  1. The collective market shares of all business operators involved in the concentration are less than 15% in the same relevant market;
  2. The market shares of the operators involved in the concentration with upstream or downstream relationships are less than 25% in either the upstream or the downstream market.
  3. The operators involved in the concentration are not in the same market, or have upstream or downstream relationships, their market shares are less than 25% in every market relevant to the transactions.
  4. The operators involved in the concentration have established joint ventures outside China, such joint ventures do not engage in economic activities in China.
  5. The operators involved in the concentration have acquired equities or assets from overseas enterprises, such overseas enterprises do not engage in economic activities in China.
  6. A joint venture enterprise that is under the common control of two or more business operators is controlled by one or more such business operators through concentration.

Circumstances under which the “Simple” Recognition Not Apply

The Tentative Provisions set out circumstances under which a concentration transaction cannot be deemed as a Summary Transaction, including:

  1. A joint venture enterprise is under the common control of two or more business operators and is controlled by one of such business operators through concentration, whereas the operator is the competitor of the enterprise in the same relevant market.
  2. The relevant market pertaining to the concentration is difficult to define.
  3. The concentration may make adverse impact on market access and technical progress.
  4. The concentration may make adverse impact on the consumers and other relevant business operators.
  5. The concentration may make adverse impact on the development of national economy.
  6. Other circumstances that may be deemed by the MOFCOM as making adverse impact on market competition.

Circumstances under which MOFCOM May Revoke the “Simple” Recognition

The Tentative Provisions further set out circumstances under which MOFCOM may revoke the recognition of a Summary Transaction, including:

  1. The applicants conceal important information or provide false materials or misleading information.
  2. A third party claims that the concentration will or may exclude or restrict competition and provides relevant evidences.
  3. MOFCOM finds that there are major changes in the concentration transactions or in the competition in the relevant market.

Our Observations

The Tentative Provisions only prescribe types and recognition standards for a “simple” case, and does not set out detailed procedures for the application, acceptance and review of a “simple” case. It is also silent on the application documents and review period for a “simple” case recognition. Therefore, from a practical perspective, there are some uncertainties in regard to the application of an expedited merger control process. According to explanations made by MOFCOM officials at some conferences, MFOCOM may further promulgate detailed measures for the summary case procedure based on its experience derived from practice going forward. Since the Tentative Provisions took effective on February 12, 2014, we understand that the parties to a concentration may request MOFCOM to recognize the concentration as a simple case and clear the transaction expeditiously, where certain conditions are satisfied.