To increase clarity and transparency on the merger remedy regime under the Anti-Monopoly Law (AML), China’s Ministry of Commerce (MOFCOM) has published draft Rules Regarding Imposition of Restrictive Conditions on Concentrations of Undertakings (the Draft Rules) for public consultation.

Under the AML, MOFCOM may impose restrictive conditions in order to address any competition concerns that may arise from a proposed merger.  On 5 July 2010, MOFCOM published the Provisional Rules on Divestiture of Assets or Business to Implement Concentrations of Undertakings (the Divestiture Rules) which was the first set of rules specifically dealing with divestiture remedies. The Draft Rules are intended to cover not only divestiture, but also behavioural remedies and will replace the Divestiture Rules once adopted.

The Draft Rules consist of seven chapters and thirty eight provisions and sets out a streamlined framework for the imposition of merger remedies, including the determination of remedies, implementation of remedies, supervision of remedies, change and cancellation of remedies, as well as the legal responsibilities for various parties.

In summary, the Draft Rules propose the following:

  • MOFCOM must advise merging parties of any competition issues in a timely manner and then set a timeframe for the parties to propose remedies which might assist MOFCOM to conditionally clear the deal;
  • if divestments are proposed, MOFCOM can, in certain circumstances, order that those take place pre-completion, alternatively they must be agreed within 6 months of the remedies being approved;
  • if behavioural remedies are proposed and agreed, these will remain in place for 10 years unless agreed otherwise;
  • the ability for MOFCOM to modify or remove conditions if the relevant competitive landscape changes; and
  • the ability for MOFCOM to impose fines or unwind a transaction if commitments are not complied with.