Key Points

  • 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. 

Background

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. 

Highlights

Interim Rules 

  1. 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.
  1. 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. 

Guidelines

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.

  1. 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.
  1. 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.

Conclusion

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.