Foreign companies involved in non-Chinese mergers need to be aware of scrutiny by the Chinese anti-monopoly authority MOFCOM and possible conditional measures that can be imposed, especially if the merged companies provide key raw materials to China. This can be derived from MOFCOM's recent conditional clearance of the merger between Uralkali and Silvinit.


Uralkali and Silvinit are two leading Russian potash producers that recently merged in a USD 7.8 billion merger. Prior to MOFCOM's conditional approval, the merger proposal was already approved by anti-monopoly authorities in Russia, Brazil, Poland and Ukraine.

MOFCOM accepted the notification of the merger on 14 March 2011 and carried out a two-phase 81-day review (the phase one review is 30 calendar days and the phase two review is 90 calendar days). On 2 June 2011, MOFCOM issued conditional approval in which certain behavioural remedies were imposed. This is the seventh conditional approval decision made by MOFCOM since the Anti-Monopoly Law of China took effect three years ago.

The following are some interesting aspects of MOFCOM's decision:

Market definition and competitive assessment

With regard to the relevant market definition, MOFCOM considered the potassium chloride market as the relevant product market based on the lack of substitutability between potassium chloride based fertilizers and other fertilizers in terms of the product characteristics and use.

As China is primarily an import market for potassium chloride, MOFCOM considered both the global and Chinese market. It appears that MOFCOM used a possible further delineation of the geographic market by separating trading by ocean freight from trading by "border".

Moreover, MOFCOM noted that the merger would create the second largest exporter of potassium chloride with a market share of over one-third of the global market. It also pointed out that China relies heavily on imports for potassium chloride, of which more than 50% are from Uralkali, Silvinit or their affiliated companies.

As a result MOFCOM concluded that there were a number of competition concerns. First of all, the concentration in the relevant market would increase after the merger. The increased market power could also restrict competition in the global ocean shipping market, while there also were concerns about the border trading market, as the number of major suppliers in that market would drop from three to two. MOFCOM also considered there to be an increased risk of coordination between major global players and took high entry barriers into account.

Remedies imposed

After several rounds of negotiations MOFCOM finally accepted a remedy package. These remedies are basically a standstill commitment, pursuant to which the merging parties will have to:

  • follow the current mode of sale, which includes price negotiations for spot sales (on a per-transaction or per-month basis) and contract sales (semi-annually or annually)
  • continue to supply a broad range and sufficient volume of potassium chloride products
  • follow current negotiation procedures, taking into account historical and current trading situations with their Chinese customers
  • appoint a monitoring trustee and report on the progress to MOFCOM on a six-month basis or upon request.


The decision provides more elaborate reasoning and this is clearly presented compared with previous decisions, in line with MOFCOM's development into a more sophisticated and efficient anti-monopoly authority. The decision also shows MOFCOM's willingness to accept behavioural or non-structural remedies. MOFCOM stressed, moreover, that China is highly dependent on potassium chloride and made a distinction between seaborne and cross-border trade. This could indicate that MOFCOM, at least in part, was motivated by industrial policy concerns. For companies that provide key raw materials to China, it will therefore be interesting to see how strictly MOFCOM will monitor and enforce compliance with the conditions imposed.