- MOFCOM clarifies in the Interim Rules the standards to distinguish simple cases of concentration from other cases.
- The Guidelines establish a procedural structure for the filing of simple cases of concentration with MOFCOM by business operators.
On February 11, 2014, the Chinese Ministry of Commerce (“MOFCOM”) issued the Interim Rules on Applicable Standards for Simple Cases regarding Concentration of Business Operators (the “Interim Rules”), which took effect on February 12, 2014. The Interim Rules identified six categories under which the business operators may file a simple case of concentration for the review of MOFCOM.
Subsequently, on April 18, 2014, MOFCOM further issued the Guidelines on the Filing of Simple Cases regarding Concentration of Business Operators (for trial implementation) (the “Guidelines”). The Guidelines took effect from the date of publication and specify the documents required for filing of a simple case with MOFCOM, the publication of the simple case notice form, and MOFCOM’s recognition on the simple case.
- Criteria for Recognition of “Simple Cases”
According to Article 2 of the Interim Rules, the following concentrations will be regarded by MOFCOM as simple cases:
- In the same relevant market (i.e. horizontal relationship), the total market share of all business operators participating in the concentration is less than 15%.
- Where the business operators to the concentration are in an upstream-downstream relationship (i.e. vertical relationship), the market share of the parties in each of the upstream and downstream market is less than 25%.
- For concentrations involving business operators that are neither in horizontal relationship nor in vertical relationship, the market share of each of the parties to the concentration is less than 25% in its market.
- A business operator to the concentration establishes a joint venture outside China which does not engage in any economic activities in China.
- A business operator to the concentration acquires equities or assets of an overseas enterprise which does not engage in any economic activities in China.
- A joint venture that is jointly controlled by two or more business operators will be controlled by one or more of such business operators after the concentration.
- Exceptions to Simple Cases
Though the Interim Rules clearly outline the criteria for determining simple cases, MOFCOM still retains considerable discretion in assessing simple cases. According to Article 3, a concentration in any of the following circumstances will not be treated as a simple case (even if it satisfies the above criteria):
- A joint venture controlled by two or more business operators becomes controlled by one of such operators through concentration and the joint venture competes with the controlling operator in the same relevant market.
- The relevant market related to the concentration is difficult to define.
- The concentration may have an adverse effect on market entry or technology development.
- The concentration may have an adverse effect on consumers or other relevant operators.
- The concentration may have an adverse effect on the development of national economy.
- Any other circumstances that will have an adverse effect on market competition.
The Interim Rules, however, neither provide any procedural rules for filing of a simple case nor specify any timeframe on the review of a simple case by MOFCOM.
While the Interim Rules are silent on the procedural benefits that a simple case might merit, the Guidelines clarify certain practical issues on the filing and determination of a simple case.
- A Simplified and Shortened Notification Form
In conjunction with the Guidelines, MOFCOM has issued a new shortened notification form for simple case filing as Annex I to the Guidelines (“Simplified Form”), which requires less extensive information compared with MOFCOM’s existing form for non-simple cases. In particular, the filing parties would no longer be required to provide the following information to MOFCOM:
- Detailed information on all affiliates of the filing parties – the Simplified Form requires only the introduction of the filing parties’ affiliates that engage in business related to the concentration.
- Detailed information on the structure of supply and demand in the relevant markets including the list of main suppliers and customers.
- Analysis on the market entry.
- The horizontal or vertical cooperative agreement between the filing parties, such as license agreement, R&D agreement, distribution agreement, etc.
- Opinions of the other parties (such as the government authorities, trade union, competitors, customers, etc.) on the concentration.
- Procedures for Filing of a Simple Case
Prior to the formal filing, the parties may request a pre-filing consultation with the Anti-Monopoly Bureau (“AMB”) of MOFCOM in order to clarify whether the contemplated concentration meets the criteria for simple cases as set forth in the Interim Rules. Such consultation, however, is not a mandatory procedure.
After receipt of the filing materials, MOFCOM will accept the filing as a “simple case” if it determines that the relevant criteria are met. If MOFCOM does not accept the filing as a simple case, the parties must re-file their transaction under the normal procedure and submit more extensive materials required for an ordinary case.
A new public notice form, as Annex II to the Guidelines, is required to be submitted by the filing parties. MOFCOM will post the completed public notice form on its official website for comment. Third parties have ten days to comment and provide evidence to MOFCOM on whether the transaction merits simple case treatment. If MOFCOM considers that a concentration does not qualify as a simple case by review of the evidence submitted by third parties, it will withdraw the simple case status and the filing parties must re-file the transaction under the normal procedure.
Moreover, MOFCOM has the discretion to withdraw the simple case status at any time during the review process. The filing parties will have the right to express their opinions when MOFCOM decides to withdraw the simple case status.
The issuance of the Interim Rules and the Guidelines signifies that MOFCOM is aiming to streamline its merger and acquisition review process by adoption of a fast-track mechanism. However, both regulations remain silent on the precise timing required for a simplified review by MOFCOM. In addition, due to MOFCOM’s considerable discretion on withdrawal of the simple case status, the parties to the concentration shall be cautious in using the simple case mechanism and be aware of the risk of longer process resulting from withdrawal of the simple case status by MOFCOM.