Simplified procedure merger filings in China continue to be cleared by SAMR in even shorter timeframes. Notifying parties can now expect a clearance decision in simplified cases within four to eight from the day of filing, although this may vary case-to-case. SAMR has also recently adopted measures to increase the transparency of its process.
Taken together with SAMR’s aggressive pursuit of failure-to-notify cases, SAMR is aiming to provide the right incentive for companies to file in China when the thresholds are met.
Qualifying for the simplified procedure
The simplified procedure for merger filings in China was introduced back in 2014. A transaction will qualify for the simplified procedure in China if:
- the combined shares of all parties in a horizontal overlap market are less than 15 percent; and
- there is a vertical relationship or the parties are active in neighbouring markets, and the parties have a share of less than 25 percent in each market.
In addition, the simplified procedure may be available where the acquisition target or joint venture does not engage in economic activities in China. And in a joint venture where two or more parties have joint control, and one or more parties among them acquire control.
Simplified cases benefit from procedural efficiencies such as:
- reduced document disclosure requirement as compared with the normal procedure; and
- a 10-day public consultation period in lieu of the targeted market tests in the normal procedure (these take between a few weeks and one or two months depending on the case).
Review periods continue to get shorter
The simplified procedure aims at a shorter timeframe for clearance. Over the years SAMR and its merger review predecessor MOFCOM have made great strides in this respect, including a shorter timeframe for issuing the initial round of information requests, focusing the information requests on the key aspects of the transaction and accelerating internal processes once no questions remain open.
On average in 2018, simplified cases were approved within approximately 16 days from the date of the formal case acceptance to the date of the clearance decision. This is a considerable improvement compared to 24 days in 2017 and around one to two months in 2015/2016. Purely offshore cases with no nexus to China were cleared within an even shorter timeframe. They were normally waved through immediately after the 10-day publication period expired. The clearance timeline for simplified cases for 2019 to date continued the trend at approximately 16 days on average (or 15.5 days to be precise).
Using this trend as a benchmark, and taking into account that each case varies depending on the circumstances, notifying parties can now expect clearance in simplified cases within four to eight weeks from pre-notification. This includes approximately two to four weeks between pre-notification and the formal acceptance of the filing, and another two to four weeks between formal acceptance and clearance.
As well as continuing to streamline and expedite its processes, SAMR is also improving the transparency of its decision making. It now publishes the names of cases unconditionally cleared on a weekly basis (since June 2019). Previously, it published this information monthly, and before that only quarterly.
But do not forget to notify
SAMR places great emphasis on pursuing failure-to-notify cases. It imposed penalty notices in 15 cases in 2018, an increase of 55 percent as compared to 2017. This year, SAMR has published five failure-to-notify cases so far.
A company found guilty of a failure to notify may face fines of up to RMB 500,000 (approximately US$ 73,000) as well as the publication of the penalty notice (i.e. reputational impact) and orders for suspending the concentration or even unwinding the concentration (where competition concerns are identified).
With further accelerated merger review and continued emphasis on failures to notify, companies would be well advised to make the filing and obtain the clearance quickly, where notification obligations are triggered.