On October 15, 2015, the European Commission (the Commission) and the Ministry of Commerce of the People’s Republic of China (MOFCOM) jointly published a Practical Guidance document setting out best practices for cooperation between the two authorities when reviewing mergers. MOFCOM’s reviews of international mergers have become more important recently in terms of the increasing number of reviews, the more streamlined review timing (for particular cases) and substantive analysis (particularly as to remedies imposed in foreign-to-foreign cases). The Practical Guidance represents a further element of cooperation between the EU and China by providing a dedicated cooperation framework specifically for mergers. It should allow for greater transparency on the timing and content of discussions between the Commission and MOFCOM, and should lead to more efficient, consistent and non-conflicting reviews where a merger is to be reviewed by both authorities.
The Practical Guidance declares a common interest between the Commission and MOFCOM in communicating “on issues of procedure and substance as well as definition of relevant market, theory of harm, competitive impact assessment and the design of remedies.” It also seeks to assure protection of business secrets and other confidential information when confidentiality waivers are exchanged, as well as the exchange of draft questionnaires and coordination of information requests where necessary.
Interestingly, the Practical Guidance indicates that communication should be established and maintained after notification is accepted and until the decision is made. This raises the question as to whether these authorities will cooperate during their respective pre-notification phases. By way of contrast, the 2011 EU-U.S. Best Practices document does anticipate cooperation during the EU pre-notification phase, particularly if the merging parties have granted a confidentiality waiver at that time. Given the length and importance of pre-notification, in particular in relation to the definition of relevant markets, cooperation during that time could be beneficial depending on the circumstances of the case. The cooperation between any authorities reviewing mergers will depend on the support of the merging parties (and sometimes third parties involved in the process), and it is expected that waivers of confidentiality will continue to be important in allowing for more in-depth discussions between the authorities.
It should also be noted that the EU-China Practical Guidance bears some similarities to the 2011 Guidance for Cooperation in Mergers between MOFCOM and the Department of Justice and Federal Trade Commission in the U.S., and thus may facilitate three-way sharing of information in international merger cases where appropriate.
Cooperation between the EU and China on competition matters is not new. The 2004 EU-China Competition Policy Dialogue aimed at establishing a permanent forum of consultation and transparency between China and the EU. The 2004 terms of reference envisaged, among other points, a dialogue between the EU and China in relation to merger control in the global economy, and in particular an exchange of views on merger legislation and enforcement. The new Practical Guidance is on the basis of this 2004 agreement. More recently, the 2012 Memorandum of Understanding between the Commission and China’s two other competition agencies, the National Development & Reform Commission and the State Administration for Industry & Commerce, sets out the expectations of cooperation and coordination in relation to areas of competition law outside of mergers. In addition, the Commission and MOFCOM have coordinated on numerous merger cases since 2008, and that experience will undoubtedly have been drawn upon when drafting the Practical Guidance.