MOFCOM’s Anti-Monopoly Bureau on 15 November 2012 published a list of all the merger cases it approved without conditions between 1 August 2008 and 30 September 2012. It has also announced that it will publish such a list each quarter from now on.
The bureau’s 15 November 2012 notice of its intention to start publishing quarterly lists of merger filings approved without conditions is available in Chinese language at: http://fldj.mofcom.gov.cn/aarticle/xxfb/201211/20121108436852.html. The 16 November notice with the first list of approvals without conditions from August 2008 to 30 September 2012 is at: http://fldj.mofcom.gov.cn/aarticle/zcfb/201211/20121108437868.html.
Implications for foreign investors
The Anti-Monopoly Law (AML) has been in force since August 2008 and the Anti-Monopoly Bureau has reviewed close to 500 cases to date. However, applying strictly article 30 of the AML, MOFCOM had published only decisions prohibiting a transaction (only one so far, the Coca Cola/Huiyuan case), or approving it with conditions. This made a total of 16 published decisions out of 474 that the bureau ruled on through to 30 September 2012. With this new list of 458 cases approved without conditions, all 474 decisions have now been published.
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Since 2008, the MOFCOM merger review process has gained significant visibility on the international scene and has become a source of growing concern for businesses facing sometimes major delays before they are able to clear their transaction and proceed with closing. The Anti-Monopoly Bureau had been facing mounting criticism for a perceived lack of transparency as to how merger cases are decided, and the resulting lack of guidance. Compared with other leading antitrust jurisdictions, MOFCOM had until now published relatively scant information on MOFCOM’s analytical framework – although recently, conditional approval decisions have become more detailed and the reasoning more articulated.
MOFCOM’s decision to publish quarterly a list of clearances without conditions is based on the Regulations on Publication of Information and goes beyond the strict disclosure requirements imposed by the AML. This announcement is therefore a major step forward and a further signal that the Anti-Monopoly Bureau plans to continue embracing international standards, in particular by sharing additional information about its decision making process.
This step is in line with other policy developments within the bureau, in particular the adoption last year of a whistle-blower mechanism to detect transactions not notified in accordance with the law, the impending adoption of new rules on remedies, and discussions on adopting a fast-track procedure.
The usefulness of the list is somewhat limited because of the small amount of information it provides. For each decision, only a “case name” (the planned merger in a few words) and the parties’ names are provided (e.g. “Party A buying 20% equity of Company B; Party A, Company B”). In essence, this reveals the nature of the transaction, the nationality, name and kind of companies involved, and (sometimes) the percentage of equity acquired, but not the bureau’s reasons for its decision, let alone details on issues such as market definition and competitive assessment.
At the same time, the lists will be indicative of MOFCOM’s thinking and procedures as they continue to develop. In particular, the list illustrates the kind of industries most often captured, and shows that transactions reviewed include acquisitions of both majority and minority interests, and acquisitions involving foreign parties, Sino-foreign joint ventures and state-owned enterprises.
Actions to consider
China’s merger regulator has become a force to be reckoned with. This new policy development is further testament to MOFCOM’s resolve to continue modernising and reach international standards.
The Anti-Monopoly Bureau’s publication of the list does not affect the criteria for determining whether a filing is required, or what it should include. However, it does demonstrate MOFCOM’s intention to press harder for enforcement. Therefore, transactions that meet the conditions for filing (whether or not competition concerns are likely to arise in China) should be notified and await MOFCOM’s clearance before proceeding to closing.
The parties should also take into account that at least some basic information on their transaction will become public, unless the filing is withdrawn. This could affect such things as the timing of the filing, and timing and contents of announcements of the transaction.
Conclusion
The publication each quarter of a list of merger cases approved without conditions will result in greater transparency for future merger approvals in China. This development is welcome and is one of several ongoing policy changes that are gradually aligning China’s merger review process with international standards.
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Business Law Digest is compiled with the assistance of Baker & McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker & McKenzie by e-mail at: Zhang Danian (Shanghai) danian.zhang@bakermckenzie.com
