經(jīng)營者集中趨勢與發(fā)展

1、Trends and DevelopmentsContributed by:Qing Ren, John Wan, Shujun Liu and Vincent WangGlobal Law Office HYPERLINK l _bookmark0 see p.8IntroductionLegal frameworkThe Anti-monopoly Law, which came into force in 2008, laid the foundation for the anti-monopoly review for concentration of business operato

2、rs ie, merger control.The Provisions of the State Council on the Thresholds for Noti- fication of Concentration of Business Operators, which was released by the State Council also in 2008, has established a threshold for the notification of concentration.Based on the above-mentioned law and administ

3、rative regula- tions, the anti-monopoly enforcement authority under the State Council has formulated several administrative rules on merger control, including:Measures for the Notification of Concentration of Business Operators;Measures for the Review of Concentration of Business Operators;Provision

4、al Measures on Investigation and Punishment of Failing to Notify the Concentration of Business Operators; andMeasures to Calculate Turnover for the Notification of Con- centration of Business Operators in Financial Industry.The anti-monopoly enforcement authority under the State Council has also for

5、mulated several standards and guiding opinions, including:Interim Provisions on Standards Applicable to Simple Cases regarding Concentration of Business Operators;Interim Provisions on Assessment of the Impact of Concen- tration of Business Operators on Competition; andGuiding Opinions for Notificat

6、ion of Concentration of Busi- ness Operators, etc.Competent authorityThe competent authority for merger control is the State Admin- istration for Market Regulation (SAMR). The Ministry of Com- merce (MOFCOM) had served in this role prior to March 2018.Within SAMR, the Anti-monopoly Bureau is in char

7、ge of reviewing and investigating the concentration of business operators, while it is also responsible for investigations into monopoly agreements and abuses of market dominance. TheAnti-monopoly Bureau has three divisions dedicated to review- ing the concentration of business operators and one div

8、ision responsible for the investigation of suspected illegal concentra- tions of business operators, including so-called “gun-jumping” violations.Enforcement overviewIn 2019, the SAMR received 503 notified concentration cases, initiated reviews of 462 cases, and completed reviews of 465 cas- es (inc

9、luding withdrawn cases). Among the 448 cases in which decisions were taken after review, 443 cases were approved with- out condition (accounting for 98.9%), five cases were approved with restrictive conditions or remedies (accounting for 1.1%), and no cases were prohibited. In the same year, the SAM

10、R inves- tigated 36 suspected gun-jumping cases and imposed adminis- trative penalties in 18 of those cases.As of 31 December 2019, China has, in total, approved 2,944 concentration cases without conditions, approved 44 cases with remedies, prohibited two cases, and imposed punishments in 52 concent

11、ration cases (including 50 gun-jumping cases and another two cases due to the violation of restrictive conditions).development of legislationDraft amendment to the Anti-monopoly Law (Draft for Public Comment)The SMAR released the Draft Amendment to the Anti-monop- oly Law (Draft for Public Comment)

12、on 2 January 2020. The main proposed amendments concerning merger control are discussed below.First, recognising the importance of “control” for the purpose of determining whether a transaction constitutes a concentra- tion of business operators, a definition for “control” is proposed to be introduc

13、ed into the law the rights or actual conditions through which business operators which, directly or indirectly, individually or jointly, have or may have a decisive impact on the manufacturing and business activities or other significant decisions of other business operator(s) (Paragraph 2 of Articl

14、e 23). If adopted, we anticipate that supporting regulations and rules might add further details.Second, it is proposed that the anti-monopoly enforcement authority under the State Council (ie, the SAMR) will be author- ised to formulate and revise the notification threshold from time to time based

15、on factors such as economic development leveland scale of industry (Paragraph 2 of Article 24). This is a power presently exercised by the State Council. Given that the cur- rent threshold has remained unchanged since 2008, we estimate that the SAMR may wish to raise the turnover-based threshold, wh

16、ich may enable the SAMR to focus its limited enforcement resources on cases with competitive concerns. It is also possible for the SAMR to introduce supplementary thresholds by refer- ence to transaction value or market share, etc.Third, it is proposed to investigate concentration cases that do not

17、meet the notification threshold but otherwise have or may have the effect of eliminating or restricting competition (Paragraph 3 of Article 24). This proposal calls for a higher level of merger control compliance ie, prior to closing, parties to a transaction need to assess whether that transaction

18、has, or might have, the effect of eliminating or restricting competi- tion. Otherwise, restrictive conditions might be imposed upon that transaction, or the parties may be required to unwind the transaction to return to the pre-concentration status (Article 34). Business operators with relatively hi

19、gh market shares are recommended to keep a close eye on the future development of this proposal.Fourth, a “stopping the clock” mechanism is proposed ie, the time taken for the following three circumstances shall not be counted in the review period:suspension of the review at the request of or with t

20、he con- sent of the notifying party/parties;the submission of supplementary documentation and mate- rials by the notifying party/parties; andthe negotiation of proposed remedies between the notifying party/parties and the enforcement authority (Article 30).This mechanism is designed to give sufficie

21、nt time to both the notifying parties and the SAMR to handle the notification and review of complicated cases, and to avoid the need for the re- notifications after withdrawal that frequently occurred in the past. It, however, may also result in it taking a longer time for a case to be cleared.Fifth

22、, the liabilities of the notifying party/parties breaching the authenticity requirement of submitted notification materials are proposed to be clarified (Article 26). An approval decision could be revoked where there is evidence showing that the materials provided by the notifying party/parties are

23、false or inaccurate (Article 51). Furthermore, a business operator that refuses to provide materials and information or provides false materials and information will be subject to a fine of no more than 1% of its sales in the preceding year, or a fine of up to CNY5 million where there are no sales o

24、r it is difficult to calculate such sales in the preceding year (Article 59).Sixth, it is proposed that the upper limit of the fine be increased from CNY500,000 to 10% of the sales in the preceding year for illegal concentrations including:those which were not notified as required by law;those which

25、 were notified but closed prior to the clearance; andviolations of restrictive conditions or prohibition decisions (Paragraph 1 of Article 55).The potential cost of violation for business operators with high sales would thus be significantly increased. Such business operators are advised to closely

26、follow the development of this proposed amendment and take extra compliance measures in response.Interim Provisions on the Review of Concentration of Operators (Draft for Public Comments)On 7 January 2020, the SAMR released the Interim Provisions for the Review of the Concentration of Business Opera

27、tors (Draft for Public Comments). This draft mainly aims to con- solidate a number of rules and standards previously formulated by MOFCOM and several standards and guiding opinions for- mulated by the SAMR since March 2018 into a comprehensive set of merger control rules.development of enforcement:

28、Notifiable TransactionsIn general, whether a transaction shall be notified to SAMR depends on two factors:whether a concentration of business operators occurs, or put another way, whether any change of control occurs as a result of the transaction; andwhether the turnovers of the business operators

29、participat- ing in the concentration reach the threshold.Certain issues to be considered for these two factors have been clarified or reaffirmed in the following cases handled by the SAMR in 2019.An acquisition of a minority equity stake may be notifiable An acquisition of a minority equity stake ma

30、y constitute an acquisition of control. Although this can be inferred from existing regulations and is also evidenced by notified cases in the past, it has been clearly illustrated by the SAMRs decision to impose penalties in the MBK/Siyanli case. In this case, the acquiring party only obtained 23.5

31、3% of the equity in the target company, but the SAMR determined that the acquiring party had acquired control over the target company and the transac- tion was thus deemed to be a concentration of business opera- tors. The SAMR further determined that this transaction had constituted a gun-jumping v

32、iolation because MBK had failed tonotify the transaction before the change in Siyanlis sharehold- ing was registered.The MBK case is also the first case in which an investment fund was punished for gun-jumping violations, and serves as a reminder to the fund industry to pay attention to merger contr

33、ol compliance in contemplating investments.Notification is not required for transactions under “same control”Article 22 of the Anti-monopoly Law provides two circum- stances under which a notification is not required:a party to the concentration owns more than 50% of the vot- ing shares of all other

34、 parties to the concentration; ormore than 50% of the voting shares of each party to the concentration is owned by the same business operator that does not participate in this concentration.However, it is not clear whether a notification is required for transactions in which the voting shares hold a

35、re less than 50% but the parties are otherwise under “same control”.This issue has been clarified by three withdrawn notifications in 2019. According to the announcements of three listed com- panies Huafon Spandex, Huilong, and Xinjiang Tianye, the SAMR approved their applications to withdraw their

36、notifica- tions for their respective proposed equity acquisitions under “same control”. As stated in Xinjiang Tianyes announcement, the concerned acquisition “is an asset restructuring under the same control and there will be no change in the actual control- ler of the company due to the said acquis

37、ition so, as commu- nicated with the Anti-monopoly Bureau, this acquisition may not constitute a concentration of business operators under the Anti-monopoly Law and relevant rules.”“Parallel acquisitions” are treated as a single concentration In other jurisdictions, such as the EU, parallel acquisit

38、ions of control of undertakings B and C by undertaking A in parallel from separate sellers would be treated as a single concentration on the condition that A is not obliged to buy either and neither seller is obliged to sell, unless both transactions proceed.In December 2019, the SAMR imposed punish

39、ments on such “parallel acquisitions” whereby the Liaoning Port Group acquired the equities of the Dalian Port Group and the Yingkou Port Group, respectively. Liaoning Port Group acquired the two target companies through two separate agreements (signed on the same day) and from different sellers. Be

40、ing formally inde- pendent of each other, these two transactions were nevertheless treated by the SAMR as a single concentration. On that basis, though the acquiring party, as a newly established company, hadno turnover in the preceding fiscal year, the SAMR was of the view that the concentration in

41、 question had met the notifica- tion threshold considering the high turnover of the two target companies. Based on public information, it is not clear whether the SAMR, in treating the two acquisitions as a single concen- tration, adopted the same standard as, or one similar to, that in other jurisd

42、ictions such as the EU. We will follow-up on this case and share our findings accordingly.Meaning of the “preceding fiscal year”The precise definition of turnover in the “preceding fiscal year” is crucially important in determining whether a concentration is notifiable. However, current laws and reg

43、ulations have not clarified the time point for the determination of the preceding fiscal year.In practice, voluntarily notified cases usually use the turnovers of the fiscal year preceding the “execution date of the concen- tration agreement” eg, the signature date of a share purchase agreement. How

44、ever, the SAMR has more often counted the turnovers of the fiscal year preceding the date of implementa- tion/closing of the concentration (eg, the date of registration of the change of shareholding) in gun-jumping cases. This practice of the SAMR continued in 2019. In all three cases where the exec

45、ution date of the concentration agreement was different from the date of the closing of the concentration, the SAMR counted the turnovers of the fiscal year preceding the date of the closing in support of its determination that the notification threshold had been met.development of enforcement: revi

46、ew processReview of simple casesThe “simple case” system was officially introduced in 2014. If qualified as a simple case, the documentary requirements will be less, and more importantly, the review period is much shorter. In 2019, most simple cases were approved within the 30-day period of prelimin

47、ary review. The average period from initiation of review to clearance was 16 days in 2019, which is basically the same as in 2018 but significantly shorter than the 23-day average in 2017.It should be noted that there is no statutory time limit for the SAMR to initiate its review after having receiv

48、ed the notification documents. In our experience, it takes two to four weeks for the SAMR to initiate the review in most simple cases.The SAMR will publish a summary of each simple case in a prescribed format on its official website in order to solicit public comments for ten days. During the public

49、ity period, any third party may object to the treatment of the case as a simple case. An increasing number of enterprises have used this channelto make comments on, or objections to, concentrations by or among their competitors or upstream/downstream enterprises.Review of non-simple casesCompared to

50、 simple cases, the notification of non-simple cases requires more documentation and a longer review period. In our experience, it normally takes four to six weeks for the SAMR to initiate the review of a non-simple case. The period from initiation of the review to clearance significantly varies. It

51、may be as short as one or two months, but can also be more than one year in complicated cases eg, the average review period for the five cases eventually approved with remedies in 2019 (see below) was 353 days. This review is time-consuming because, in addi- tion to the fact that non-simple cases wo

52、uld more likely give rise to competitive concerns, the SAMR needs to collect opinions from relevant government authorities, industry associations, peer-competitors, and upstream and downstream enterprises during the review. In large mergers, it is particularly important to get a green light from the

53、 aforesaid stakeholders.Conversion from a simple case to a non-simple caseIf the SAMR finds during the course of its review, either by itself or upon receiving an objection from a third party, that a concentration does not qualify as a simple case, it shall revoke its determination that the case is

54、a simple one and require the notifying party/parties to re-notify the case as a non-simple one. The latest example is Novelis acquisition of Aleris, which was approved with remedies in December 2019. Based on publicly available information, the transaction had been notified as a simple case in late

55、August 2018 on the basis of definitions of broader relevant markets. The SAMR received objections from third parties during the publicity period, and required Novelis to re-notify the transaction as a non-simple one. Novelis did so, in a process in which it redefined two narrower relevant markets.de

56、velopment of enforcement: Competitive Assessment and remediesIn 2019, the SAMR approved five concentration cases withremedies, of these four cases involved only foreign enterprises while one case involved a foreign enterprise as one party and a domestic enterprise as the other. From the SAMRs decisi

57、ons in these five cases, it is possible to better understand how the SAMR will assess the competitive effects of a particular transac- tion and what remedies will be taken to address the identified competitive concerns.Horizontal mergersIn four cases including Cargotec/TTS, II-VI/Finisar, Garden/ DS

58、M and Novelis/Aleris, there existed horizontal overlap between the parties to the concentration. For horizontal merg- ers, the SAMR normally assesses whether the concentration willhave unilateral effects or co-ordination effects by considering factors including:the market shares of the parties;the m

59、arket concentration;whether the parties are close competitors; andthe market entry barriers.For example, in Novelis/Aleris, the SAMR found that the con- centration would likely eliminate or restrict the market compe- tition mainly on the grounds that:Novelis, already in a position of market dominanc

60、e with a market share of 65-70%, would further reinforce its domi- nance in the market;because Aleris was the number three player in the relevant markets, this transaction would eliminate significant compe- tition constraint for Novelis;both markets having a high level of concentration, there would