On December 5, 2008, Mr. Shang Ming, the Director General of the Anti-monopoly Bureau (AMB) under the PRC Ministry of Commerce (MOFCOM), was invited by the official website of China’s central government to discuss antitrust issues during an online Q&A session. Mr. Shang’s responses to the various questions raised by the public participants may provide insight into how China’s antitrust legislation will be officially interpreted and enforced. However, as MOFCOM serves only as one of the three Anti-Monopoly Enforcement Authorities (AMEA) and focuses primarily on antitrust reviews of M&A transactions, Mr. Shang’s responses may be limited to the understanding of China’s Anti-Monopoly Law (AML) for antitrust matters associated with M&A transactions. We summarize below some of the highlights of Mr. Shang’s remarks.  

AMB’s Responsibilities  

The State Council has designated MOFCOM to be responsible for antitrust reviews of M&A transactions. MOFCOM acts in this area through the AMB. Mr. Shang outlined the major responsibilities of the AMB, noting that the AMB focuses on four areas: conducting antitrust reviews of M&A transactions; offering guidance to Chinese enterprises for dealing with antitrust issues encountered overseas; involvement in international communication and cooperation regarding competition policy; and dealing with monopolies existing in foreign trade activities.  

Expanding on the fourth area, Mr. Shang indicated that the AMB’s power to supervise monopolies existing in foreign trade activities may overlap with the jurisdiction of both the National Development and Reform Commission (NDRC) and the State Administration of Industry and Commerce (SAIC). To avoid conflicts, the AMB will coordinate with NDRC and SAIC when enforcing the AML in foreign trade activities. Mr. Shang also noted that the PRC Foreign Trade Law, rather than the AML, outlines the responsibilities of the AMB to deal with monopolies in foreign trade activities.  

Delegation of AML Enforcement Power  

While an AMEA is explicitly designated to play a major role in the enforcement of the AML, Article 10 of the AML also allows all AMEAs to empower provincial agencies to enforce the AML as necessary. The rationale behind the delegation of power to enforce the AML is that although AML enforcement mostly involves central level issues, collaboration from local agencies is indispensable for implementing the AML in some situations. However, an AMEA’s authority to delegate enforcement power is not limitless. The AML imposes certain limitations on the delegation of power, stating that only provincial agencies of an AMEA (lower agencies are excluded) may take over an AMEA’s responsibilities at the AMEA’s discretion.  

Mr. Shang further categorized such delegation into two major types: one-time delegation and general delegation. One-time delegation means that any of the AMEA entities (NDRC, MOFCOM, or SAIC) may authorize one of their provincial agencies to assist in AML enforcement activities, such as conducting onsite investigation, in a specific instance. General delegation allows a provincial agency to exercise the AML enforcing power granted by the AMEA more often than once, and/or always in certain instances. At present, none of MOFCOM, NDRC, or SAIC has ever delegated its power with regard to antitrust review. Mr. Shang believed that an AMEA may delegate power to a provincial entity by issuing an authorization document to the provincial agency, or by other means.  

AML’s Implementation Rules  

The issue of whether further implementation rules will be enacted to facilitate enforcement of the AML remains a hot topic and, if yes, questions have arisen regarding what types of new rules should be put in place. According to Mr. Shang, it is a misconception that the enforcement of the AML will not function well without a large number of specific implementation rules. In fact, the AML is quite practicable and may be enforced directly. The only substantial obstacle for the implementation of the AML, that of no clear filing thresholds for enterprises considering M&A transactions under the AML, has been overcome. The State Council issued the Provision on Pre- Merger Filing Criteria of Business Operators (the Filing Criteria Provisions) on August 3, 2008, almost at the same time as the implementation of the AML. Therefore, currently no substantial obstacles exist to the enforcement of the AML.  

However, Mr. Shang did state that even though no substantial obstacles exist to the enforcement of the AML, more detailed rules may still be formulated to better implement the AML. The Antimonopoly Commission under the State Council (AMC) and the AMEA (MOFCOM, NDRC, and SAIC) are drafting detailed rules, including internal working procedures and guidelines, based on each agency’ own experience with AML enforcement. Mr. Shang expected that certain AML implementation rules might be issued by the end of the year 2008.  

Relationship Between Antitrust and Intellectual Property Rights  

The AML contains only one article (Article 55) regarding the relationship between antitrust and intellectual property rights (IPR), provide limited guidance for both the AMEAs and market players. Concerns have been articulated regarding potential conflict between antitrust enforcement and protection of IPR. A further question is whether antitrust enforcement will restrict the exercise of IPR.  

In response to these concerns, Mr. Shang explained the relationship between antitrust and IPR as the two sides of a coin. The AML may seem to be incompatible with the protection of IPR because of the exclusive nature of IPR and the fact that the AML aims to combat monopoly and exclusivity. However, the AML and the protection of IPR do not contradict each other. Conversely, they together create an environment that can protect IPR and encourage normal competition at the same time. As with any other civil rights, IPR should be exercised within a certain scope. If abused, IPR may cause antitrust concerns. Mr. Shang assured the public that enforcement of the AML would not interfere with the legal exercise of IPR.  

Antitrust and Enterprise Growth  

To address the concern that the AML may restrict enterprises from growing bigger and stronger, Mr. Shang defused such worries by saying the AML would encourage enterprise growth through legal competition to become bigger and stronger. He justified his opinion with the following:  

First, the AML neither opposes nor prohibits enterprises from obtaining dominant market position through legal means. The AML does not restrict an enterprise merely because it holds a dominant market position. Rather, the AML does not allow enterprises to abuse a dominant market position.  

Second, the antitrust review of M&A transactions set forth in the AML does not prevent enterprises from growing bigger and stronger through legal M&A activities. Hence, enterprises are free to conduct concentrations, multiply scale, and enhance competitiveness through fair competition and combination.  

Third, the AML in principle allows small and medium-sized enterprises to execute certain agreements to increase efficiency. Additionally, under the AML enterprises are exempted from being subject to antitrust review under certain circumstances.  

Last, the AML prohibits abuse of administrative powers to restrict or eliminate competition. Such provisions under the AML could help create an open, free, and competitive market that fosters enterprise growth.  

Application of the AML in Foreign Trade  

Mr. Shang talked about the application of the AML in the foreign trade sector. In principle, monopoly agreements between competing business operators are prohibited under the AML. But in order to encourage domestic enterprises to strengthen mutual collaboration in foreign trade, Article 15 of the AML exempts certain agreements executed by business operators for the purpose of protecting their own legitimate interests in the areas of foreign trade and foreign economic cooperation.  

Despite the exemption in Article 15, Mr. Shang reminded the Chinese export enterprises of potential antitrust issues encountered overseas. According to Mr. Shang, the antitrust laws of countries to which Chinese exporters are importing may still be applicable to those monopoly agreements that would have otherwise been exempted in China. For example, several Chinese vitamin C manufacturing enterprises faced severe antitrust charges in the United States while they were excepted from any antitrust challenges in China. Therefore, Mr. Shang advised Chinese export enterprises to be more cautious.  

AML’s Applicability to Hong Kong and Macau  

When asked about whether the AML has jurisdiction over Hong Kong and Macau, Mr. Shang said that no Chinese laws are applicable in Hong Kong and Macau except those laws specified in the annexes of the Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China (the Hong Kong Basic Law) and the Basic Law of the Macau Special Administrative Region of the People’s Republic of China (the Macau Basic Law). The AML is excluded from both the annexes of Hong Kong Basic Law and Macau Basic Law, so the AML would not be applied in Hong Kong and Macau.  

Equal Treatment to All Enterprises  

As to whether state-owned enterprises (SOEs) would enjoy preferential treatment under the AML, Mr. Shang reiterated that all enterprises would be equally treated under the AML whether stateowned, private or foreign. Article 7 of the AML provides protection to special industries dominated by SOEs where the national economy’s lifeline and national security are at stake, and protection to industries implementing exclusive dealings and operations in accordance with the law. However, Article 7 also states that such enterprises shall not abuse their controlling or exclusive dealing position to harm the interests of the consumer. Therefore, SOEs will be subject to the AML in the event they abuse their dominance.  

Impact of the Ongoing Financial Crisis on the Enforcement of the AML  

When asked about the impact of the ongoing financial crisis on the enforcement of the AML, Mr. Shang stressed that the purposes and goals of AML enforcement would remain the same. In other words, an M&A transaction should not restrict or exclude competition in any event. As a result, the AMB would not particularly strengthen or relax its enforcement even in the midst of the current financial crisis.  

Pre-Merger Filing and Antitrust Review  

As for the thresholds triggering the filing requirement, Mr. Shang asked market players to pay attention to both Article 3 and Article 4 of the Filing Criteria Provisions. Article 3 provides that filing parties must file with MOFCOM if during the previous fiscal year at least two of the parties each had a turnover of more than RMB 400 million within China, and the total global turnover of all the parties to the transaction exceed RMB 10 billion or the total turnover within China of all the parties to the transaction exceeded RMB 2 billion. If parties to a transaction meet the thresholds but do not file the transaction with MOFCOM, they will be subject to the penalties prescribed under the AML.  

According to Article 4, even if the parties do not meet the thresholds, MOFCOM may initiate investigations if the transaction has, or may have, the effect of eliminating or restricting competition. For example, such investigations could be initiated if the parties to a transaction have not triggered the filing thresholds, but are top market players in the relevant market and the transaction has, or may have, the effect of eliminating or restricting competition. Hence, Mr. Shang encouraged such parties to file with MOFCOM to ensure smooth transaction. Without such a filing, if facts and evidence duly collected indicate that the related transaction has, or may have, the effect of eliminating or restricting competition, the parties may be subject to the penalties prescribed under the AML.  

According to Mr. Shang, as of December 5, 2008, MOFCOM had officially accepted 15 pre-merger filings, 8 of which have been approved. Generally speaking, MOFCOM will simply notify the parties to the transaction of MOFCOM’s decision on their transaction. However, under the AML, MOFCOM must promptly announce to the public its decision to prohibit a transaction or a decision to attach restrictive conditions to a transaction.  

Mr. Shang also briefly discussed two high-profile cases. As for the proposed acquisition of Rio Tinto by BHP Billiton, MOFCOM officially accepted the filing on November 25, 2008, but on the same day BHP Billiton announced cancellation of the proposed acquisition due primarily to the current global economic downturn. As for the proposed acquisition of Huiyuan by Coca-Cola, Coca- Cola submitted filing materials to MOFCOM in September 2008; however, since the filing materials were not duly submitted according to Article 23 of the AML, MOFCOM requested that Coca-Cola submit supplementary materials. MOFCOM officially accepted the filing on November 19, 2008.  

Mr. Shang also reiterated the antitrust review process. According to the AML, the timeline of the antitrust review shall commence on the date that all filing materials are duly submitted. MOFCOM, when receiving the filing materials, will decide whether the filing materials are “duly submitted.” All filings are subject to an initial 30-day review period from the date of official acceptance of the filing and an additional 90-day further review (extendable by a further 60 days in certain circumstances) from the end of the initial review period if not cleared within the first 30 days. Mr. Shang indicated that over 80 percent of pre-merger filings have been cleared within the initial 30-day review period.  


Mr. Shang addressed several public concerns in detail during the recent online Q&A sessions. His comments may provide market players helpful guidance to evaluate the AML’s enforcement. Generally speaking, we believe that Mr. Shang’s reiteration and elaboration on the AML, and his understanding of the AML, is a reflection of the AMB’s perspective. The information we obtained from the Q&A session remains consistent with previous information on the AML, such as the Q&A session with the media, related to InBev’s acquisition of Anheuser-Busch, which MOFCOM posted on its website on November 21, 2008. We believe the enforcement of China’s antitrust laws remains consistent so far, and will continue to closely track its development.