经营者集中趋势与发展.docx

Trends and DevelopmentsContributed by:Qing Ren, John Wan, Shujun Liu and Vincent WangGlobal Law Office 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 operators - ie, merger control.The Provisions of the State Council on the Thresholds for Notification 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 administrative regulations, 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; Provisional Measures on Investigation and Punishment of Failing to Notify the Concentration of Business Operators; andMeasures to Calculate Turnover for the Notification of Concentration of Business Operators in Financial Industry.The anti-monopoly enforcement authority under the State Council has also formulated 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 Concentration of Business Operators on Competition; and Guiding Opinions for Notification of Concentration of Business Operators, etc.Competent authorityThe competent authority for merger control is the State Administration for Market Regulation (SAMR). The Ministry of Commerce (MOFCOM) had served in this role prior to March 2018.Within SAMR, the Anti-monopoly Bureau is in charge 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 reviewing the concentration of business operators and one division responsible for the investigation of suspected illegal concentrations 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503 notified concentration cases, initiated reviews of 462 cases, and completed reviews of 465 cases (including withdrawn cases). Among the 448 cases in which decisions were taken after review, 443 cases were approved without 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 SAMR investigated 36 suspected gun-jumping cases and imposed administrative 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 concentration 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-monopoly Law (Draft for Public Comment) 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 concentration of business operators, a definition for “control“ is proposed to be introduced 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 Article 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 authorised to formulate and revise the notification threshold from time to time based on factors such as economic development level and scale of industry (Paragraph 2 of Article 24). This is a power presently exercised by the State Council. Given that the current threshold has remained unchanged since 2008, we estimate that the SAMR may wish to raise the turnover-based threshold, which 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 reference to transaction value or market share, etc.Third, it is proposed to investigate concentration cases that do not 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 has, or might have, the effect of eliminating or restricting competition. 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 high 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 the consent of the notifying party/parties;the submission of supplementary documentation and materials by the notifying party/parties; and the negotiation of proposed remedies between the notifying party/parties and the enforcement authority (Article 30).This mechanism is designed to give sufficient 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 renotifications 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, 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 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 or 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 were notified but closed prior to the clearance; and violations 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 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 Operators (Draft for Public Comments). This draft mainly aims to consolidate a number of rules and standards previously formulated by MOFCOM and several standards and guiding opinions formulated by the SAMR since March 2018 into a comprehensive set of merger control rules.development of enforcement: Notifiable Transactions In 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 participating 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 he notifiable An acquisition of a minority equity stake may 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 SAMR's decision to impose penalties in the MBK/Siyanli case. In this case, the acquiring party only obtained 23.53% of the equity in the target company, but the SAMR determined that the acquiring party had acquired control over the target company and the transaction was thus deemed to be a concentration of business operators. The SAMR further determined that this transaction had constituted a gun-jumping violation because MBK had failed to notify the transaction before the change in Siyanlik shareholding 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 control compliance in contemplating investments.Notification is not required for transactions under usame control”Article 22 of the Anti-monopoly Law provides two circumstances under which a notification is not required: a party to the concentration owns more than 50% of the voting shares of all other 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 are less than 50% but the parties are otherwise under usame control'：This issue has been clarified by three withdrawn notifications in 2019. According to the announcements of three listed companies -Huafon Spandex, Huilong, and Xinjiang Tianye, the SAMR approved their applications to withdraw their notifications for their respective proposed equity acquisitions under “same control'： As stated in Xinjiang Tianye's announcement, the concerned acquisition “is an asset restructuring under the same control and there will be no change in the actual controller of the company due to the said acquisition so, as communicated 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 acquisitions 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 punishments 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. Being formally independent 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, had no turnover in the preceding fiscal year, the SAMR was of the view that the concentration in question had met the notification 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 concentration, adopted the same standard as, or one similar to, that in other jurisdictions such as the EU. We will follow-up on this case and share our findings accordingly.Meaning of the "preceding fiscal yeary'The precise definition of turnover in the ''preceding fiscal year” is crucially important in determining whether a concentration is notifiable. However, current laws and regulations 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 concentration agreement" - eg, the signature date of a share purchase agreement. However, 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 execution 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:review 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 preliminary 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 received 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 corrirnenls for ten days. During the publicity period, any third party may object to the treatment of the case as a simple case. An increasing number of enterprises have used this channel to make comments on, or objections to, concentrations by or among their competitors or upstream/downstream enterprises.Review of non-simple casesCompared to 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