SECTION 1: Overview
1.1 Please provide a brief overview of your jurisdiction's
merger control legislative and regulatory framework.
The Anti-Monopoly Law (AML) provides the primary statutory
framework for merger control in China, supplemented by
additional guidelines on specific topics, such as:
- Measures for the Declaration of
Concentration of Business Operators;
- Guidelines on the Notification of the
Concentration of Undertakings;
- Trial Guidelines on Notification of Simple
Cases for Concentrations of Undertakings; and
- Trial Provisions on Imposition of
Restrictive Conditions on Concentrations of
The Anti-Monopoly Bureau of the Ministry of Commerce
(MOFCOM) conducts merger control reviews in China. As explained
below (see Section 3.1), failures to comply with the AML (such
as through failure to report a notifiable transaction or by
providing misleading information) can result in civil
sanctions. These include fines against individuals and
companies; however, there are no criminal penalties with regard
to violations of merger control.
Although MOFCOM has issued helpful guidelines such as those
outlined above, in many respects it retains significant
discretion in deciding on matters relating to merger control,
with little real opportunity for judicial review. In addition
(as explained in Section 4.2), MOFCOM's substantive review can
take account of matters unrelated to issues of pure competition
law, such as a transaction's impact on national economic
development. This adversely affects predictability within the
regime, and can magnify the perception of intrusiveness.
1.2 What have been the key recent trends and developments
in merger control?
Merger control in China often takes significantly longer
than review in other jurisdictions. As a result, in 2014 MOFCOM
introduced a simplified procedure to help accelerate review of
no issue cases. By 2017, the simplified procedure has largely
been proven a success, cutting reviews for cases in the
simplified procedure to less than 25 days from acceptance into
phase I. At the same time, however, reviews in the ordinary
procedure (even of non-issues cases) continue to last far
longer than comparable reviews in other jurisdictions, often
four to six months from acceptance into phase I, and
potentially even longer.
2017 also saw a pronounced increase in conditional
clearances issued by MOFCOM. As of December 7 2017, six cases
have been conditionally cleared (compared to two each in 2015
MOFCOM has continued to aggressively enforce failures to
report notifiable transactions for review. Since 2015, MOFCOM
has imposed penalties in at least 17 transactions for such
failures to file.
1.3 Briefly, what is your outlook for merger control over
the next 12 months, including any foreseeable legislative
During 2017, China's Antimonopoly Commission of the State
Council consulted with the legal profession, foreign and
domestic companies and legal scholars to consider changes to
the AML. Changes under consideration include a revised
definition of 'control,' an increase in penalties for failures
to notify, and clarifications on the interplay of intellectual
property and competition law. The business community has also
sought an increase in the revenue thresholds required for
notification. Proposed amendments should be announced in 2018.
In addition to the changes being made to the AML, there are
ongoing consultations on the Guidelines on Abuse of
Intellectual Property Rights, which will contain a section on
intellectual property rights in relation to merger control.
SECTION 2: Jurisdiction
2.1 What types of transactions are caught by the rules?
What constitutes a merger and how is the concept of control
A transaction is notifiable in China where it constitutes a
concentration under AML Art. 20 and the parties meet the
relevant revenue thresholds (see Section 2.2).
AML article 20 defines a concentration as: a merger; an
acquisition of control through share and/or assets acquisition;
or an acquisition of control through contract or other means
(ie obtaining the ability to exercise 'decisive influence' over
a target). The AML does not define control, although the
Guidelines on the Notification of the Concentration of
Undertakings state that control can be acquired directly or
indirectly, including joint or sole control and can be de jure
or de facto.
Generally, MOFCOM treats acquisitions of 50% or more of
voting rights or economic interest as an acquisition of sole
control, and will treat as joint control acquisitions of less
than 50% which include board representation with unilateral
veto rights over: the appointment or removal of senior
management; approval of annual business plan or budget; and/or
approval over major investments.
In its analysis, MOFCOM will also consider factors such as
inter alia the purpose of the transaction and future
plans, shareholder agreements on board voting, and significant
business relationships or cooperation agreements between a
party and the target. Joint ventures (JV) (both newly formed
and those created by acquisition of joint control over an
existing business) will also generally be notifiable if the
revenue thresholds are met by the respective parents –
both full-function and non-full function character JVs are
2.2 What are the jurisdictional thresholds for
notification? Can the authorities investigate a merger falling
below these thresholds?
Notification to MOFCOM is required if the transaction
creates a concentration (as discussed in Section 2.1) and the
parties meet the following revenue thresholds in the last
preceding financial year:
(i) (a) combined worldwide turnover of all parties exceeds
RMB10 billion ($1.54 billion); or (b) combined turnover in
mainland China of all parties RMB2 billion; and
(ii) each of at least two parties has individual turnover in
mainland China exceeding RMB400 million.
The seller is generally not considered a party to the
transaction as long as it is not maintaining a material
ownership in the target.
For financial institutions and insurance companies, the
thresholds are increased by a factor of 10: combined turnover
must exceed RMB100 billion worldwide or RMB20 billion in
mainland China, and individual turnover must exceed RMB4
billion in mainland China.
MOFCOM also has the power to investigate transactions that
fall below these thresholds.
2.3 Are foreign-to-foreign transactions caught by the
rules? Is a local effect required to give the authority
jurisdiction to review it?
Foreign to foreign transactions are caught by the AML, and
there is no requirement of a local presence or effect. However,
in the case of a target or JV with no local presence or effect,
the simplified procedure may be available if the filing
thresholds are otherwise met.
SECTION 3: Notification
3.1 When the jurisdictional thresholds are met, is a filing
mandatory or voluntary? What are the risks/sanctions for
failing to notify a transaction and closing prior to
Pre-closing approval is mandatory in China when the
thresholds are met. Failing to notify a transaction that meets
the filing thresholds and closing without approval can result
in the following civil sanctions:
- a fine of no more than RMB500,000;
- a prohibition against the execution of a
- an order to unwind the transaction or sell assets or
- any other necessary measure.
Since 2015, MOFCOM has imposed fines in at least 17 cases
for failure to notify.
3.2 Who is responsible for filing? Do filing fees
There are no filing fees.
3.3 Is there a deadline for filing? What are the filing
requirements and how onerous are they?
There is no deadline for filing, however, approval of a
notifiable transaction must be received before a transaction
closes. The parties must submit materials such as corporate
information, nature of the transaction, impact of the
concentration on competition, market definitions and share
data, and supplier, customer and competitor information.
3.4 Are pre-notification contacts available, encouraged or
required? How long does this process take and what steps does
Pre-notification is not required under the AML; however, the
Guidelines on the Notification of the Concentration of
Undertakings does allow for an optional consultation procedure
if the parties so choose.
SECTION 4: Review process and timetables
4.1 What is the standard statutory timetable for clearance
and is there a fast-track procedure? Can the authority extend
or delay this process? What are the different steps and phases
of the review process?
There are two tracks for review in China, the ordinary
procedure or the simplified procedure. Under either procedure,
MOFCOM first reviews the file for completeness (often issuing
requests for additional information), and this process usually
takes between four and eight weeks.
Phase I review by MOFCOM lasts 30 calendar days from
acceptance. If additional review is required, Phase II lasts an
additional 90 calendar days. If needed, Phase II can be
extended for an additional 60 calendar days. MOFCOM does not
have the power to stop the clock during its review. In complex
cases with significant overlaps or non-competition factors at
play, MOFCOM may require the parties to pull-and-refile to
begin again at phase I if review has not been completed by the
end of the review period.
Under the ordinary procedure, MOFCOM will usually not clear
until the end of phase II, even in straight-forward or
relatively non-controversial cases. Thus, cases in the ordinary
procedure usually take four to six months from acceptance.
By contrast, cases in the simplified procedure are
ordinarily cleared during phase I. The simplified procedure can
only be used with the discretionary approval of MOFCOM, but
cases will generally qualify if they meet the following
(i) combined market shares below 15% on any horizontal
(ii) individual market shares below 25% in any
vertically-related or neighbouring market;
(iii) the transaction involves the establishment of a JV
outside of China where the JV does not conduct economic
activities in China, or the acquisition of a target not active
in China; or
(iv) the transaction involves acquisition of sole control
over a target by a parent with pre-existing joint control.
4.2 What is the substantive test for clearance? What are
the theories of harm the authorities will investigate? To what
extent does the authority consider efficiencies arguments?
AML article 28 sets out the substantive test for clearance,
requiring an assessment of whether the transaction could
eliminate or restrict competition. MOFCOM will consider whether
any procompetitive effects outweigh potential anticompetitive
In making its assessment, MOFCOM will consider factors set
out in AML article 27, considering market shares, market power,
concentration levels, and whether the transaction will impact
national economic development. MOFCOM will consult other key
stakeholders such as the Ministry of Industry and Information
Technology and other relevant sector regulators, as well as
important Chinese customers, suppliers and competitors in
making its assessment.
MOFCOM is becoming more sophisticated in its application of
economic analysis and its considerations of efficiencies;
however, these factors are not usually determinative.
4.3 Are remedies available to address competition concerns?
What are the conditions and timing issues applicable to
MOFCOM can impose structural and behavioural remedies (or a
hybrid thereof) in order to cure competitive or other issues.
MOFCOM has also implemented a unique hold-separate remedy in
five transactions, requiring acquiring companies to maintain,
to varying degrees, the independence of the target (including
design, production, brands, and sales and marketing) while
implementing internal firewalls to protect against sharing of
Remedies can be offered up at any stage of the review
process, however, there is a time limit that requires that the
final plan must be submitted to MOFCOM 20 calendar days prior
to the deadline of the final review phase. In its review of
proposed remedies, MOFCOM commonly engages with third parties
by distributing questionnaires, holding hearings, organising
expert studies or adopting other relevant methods to test the
SECTION 5: Judicial review
5.1 Please describe the parties' ability to appeal merger
control decisions and the time-limits applicable. What is the
typical time-frame for appeals.
Under the AML, parties have the right to appeal a decision
for reconsideration by MOFCOM. The parties may further appeal
the reconsideration decision in the Chinese courts. There are
no publicly-known examples of any appeals of merger control
Counsel, Skadden Arps Slate Meagher &
Hong Kong, China
T: +852 3740 4864
Andrew Foster leads Skadden's antitrust and
competition group in Asia-Pacific, practicing in
Beijing and Hong Kong. Repeatedly selected for
inclusion as a leading competition lawyer in Chambers
Global, Chambers Asia Pacific and Who's Who Legal:
Competition, Foster is recognised as a leader in
international merger control practice and has published
widely on global competition issues.
Associate, Skadden Arps Slate Meagher
Hong Kong, China
T: +852 3740 4866
Jacqueline Arena advises on international
competition and EU antitrust issues. She represents
multinational clients across different industry
sectors, including financial services and
pharmaceuticals. Arena has worked on a number of merger
transactions involving notifications to the European
Commission as well as multijurisdictional analyses and
filings to regulators around the world. In 2015, she
undertook a client secondment with a Hong Kong bank to
advise on compliance with and implications of the new
Hong Kong competition regime. Arena joined Skadden in
2017; prior to that, she worked at leading
international law firms in Brussels and Hong Kong.