The Business Operator Concentrations Filings Measures (Filing Measures) and the Review of Business Operator Concentrations Measures (Review Measures), issued by the Ministry of Commerce, came into effect on 1 January. The two sets of measures, which are ministerial level regulations formulated pursuant to the PRC Anti-Monopoly Law, set out specific provisions on matters relating to anti-monopoly filings and the review of business operator concentrations.
Concentrations, M&A
The “concentrations” specified in Article 20 of the Anti-Monopoly Law include the two commonly seen forms of company mergers and acquisitions, “mergers” and “acquisition, by way of equity or asset acquisition, of control over another business operator”, as well as the “acquisition, by way of contract or other such means, of control over, or the ability to exert a decisive influence on, another business operator”.
Business turnover
Given that the fundamental basis for determining whether a filing needs to be made in relation to a concentration is the business turnover, and in particular the “business turnover in China”, of the relevant business operators, Article 4 of the Filing Measures specifies the scope of business turnover and defines what “business turnover in China” is.
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Articles 5, 6 and 7 of the Filing Measures specify the circumstances in which the turnover of the business operators is to be combined, and the exceptions to this. They expressly specify that business turnover that occurs in transactions between business operators that are in a control relationship is not to be included in the calculation of the business turnover of the concentration. With a view to preventing business operators from avoiding their filing obligations by conducting multiple transactions, Article 7 specifically provides that multiple transactions falling below the filing threshold between the same business operators during a two year period are to be treated as a single concentration transaction, and should be combined when calculating the business turnover of the relevant concentration.
Statutory and voluntary filing
The first paragraph of Article 9 of the Filing Measures specifies the various circumstances in which parties have a filing obligation, and expressly requires that when a party with a filing obligation arising from its securing control or being able to exercise a decisive influence over other business operators makes a filing, the other business operators are to cooperate. This aims to ensure that, in a hostile takeover, the party with the filing obligation can smoothly carry out the filing.
The second paragraph of Article 9 further provides that if the party with a filing obligation fails to carry out the filing, the other business operators involved in the transaction may do so.
Pursuant to the Filing Measures, a business operator that has made a filing can withdraw the filing, and business operators that are party to a concentration transaction that falls below the reporting threshold may voluntarily make a filing with the Ministry of Commerce.
Filing requirements
The Filing Measures distinguish between documents and information that must be submitted (Article 10) and those that can be voluntarily submitted (Article 11). As long as a filing party provides the documents and information specified in Article 10, it should be deemed to have performed its filing obligations.
A filer should simultaneously submit a public version and a confidential version of the filing documents and information. The public version should include the necessary data and information to permit a third party reasonably to assess the impact that the concentration will have on competition.
Fairness of the review procedure
- Pre-filing discussions: Article 8 of the Filing Measures provides that, if the business operators in a concentration are unsure whether a filing is required, or unclear about the specifics of a filing, they may apply to the Ministry of Commerce for discussions about their situation.
- Statements and arguments: Article 5 of the Review Measures sets forth the channels, methods and procedures by which the business operators in a concentration may state their opinions and present their arguments.
- Seeking the opinions of third parties: Article 6 specifies that, during the review process, the Ministry of Commerce may seek the opinions of such entities and individuals as relevant government authorities, industry associations, business operators and consumers on a concentration.
- Calling of hearings: the Review Measures provide that the Ministry of Commerce may, at its own initiative or at the request of a relevant party, call a hearing, conduct an investigation to gather evidence and/or listen to the opinions of relevant parties.
Three possible review decisions
The Ministry of Commerce may render any of three possible decisions in an anti-monopoly review of a concentration. These are (1) a decision prohibiting the concentration, (2) a decision not to prohibit the concentration or (3) a decision approving the concentration but with restrictive conditions.
Pursuant to the Review Measures, if the Ministry of Commerce deems that a concentration has or could have the effect of eliminating or restricting competition, it has the right to oppose it. If this occurs, the business operators involved in the concentration may submit a written defence, or propose restrictive conditions to eliminate or minimize the adverse effect of the concentration on competition, thereby enabling their concentration transaction to pass the review.
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