Merger control has been actively enforced in China since the Anti-monopoly Law (AML) came into force in August 2008, including some interesting cases involving non-Chinese companies. Last year was no exception and we expect this trend to continue in 2011, as the Ministry of Commerce (MOFCOM) becomes more confident in its application of the law. Antitrust enforcement under the AML in the non-merger areas has been slower to get off the ground, but we expect it to gain momentum in 2011.
In July 2010 MOFCOM augmented its merger control guidance by publishing guidelines for divestment remedies. These broadly follow the European Commission’s approach to logistics and procedure, although they give MOFCOM more discretion because they are less detailed – for example, there are no standard texts for the submission of commitments proposals or for the monitoring or divestment trustee mandate. MOFCOM is currently working on a set of substantive guidelines for the assessment of mergers. We expect these guidelines to be published this year.
Last year also saw the sixth conditional clearance under the AML – for the Novartis acquisition of Alcon. To obtain clearance, Novartis was required to stop selling its ophthalmological anti-infection products in China for five years, due to Alcon’s large share of this market. Novartis was also required to terminate its sales partnership with the largest supplier of contact lens care products in China, due to concerns about potential co-ordinated effects – the first time these have been raised. MOFCOM used its powers under the divestment guidelines for the first time by requiring Novartis to appoint a monitoring trustee to supervise the implementation of the remedies.
To date, antitrust enforcement actions have been focused on domestic concerns – particularly on ensuring that staple food products are not over-priced. These actions have been taken primarily under the older Price Law rather than the AML. However, the two relevant antitrust agencies, the National Development and Reform Commission (NDRC) and the State Administration of Industry and Commerce (SAIC), have recently published final substantive and procedural regulations setting out the dual enforcement regime under the AML, which will come into force on 1 February 2011. We expect antitrust enforcement to get tougher in 2011, for both cartels and abuse of dominance.
Companies operating in China will need to evaluate their position carefully in 2011 to ensure continued compliance with the law and the new enforcement guidelines. There are some significant differences between the two sets of guidelines – for example, in relation to the fine reductions available to companies that apply for leniency. This may not initially appear problematic because the enforcement responsibilities of each agency differ: the SAIC is responsible for non-pricing-related arrangements, whereas the NDRC is responsible for the price-related provisions of the AML. However, for businesses these areas are often closely interrelated in practice. This increases the complexity for companies seeking to navigate the rules because more than one authority may have jurisdiction for investigating closely related, and in some cases overlapping, commercial arrangements.