The Ministry of Commerce (MOFCOM) and the European Commission (EC) entered into a best practices framework in mid-October 2015 for co-operation on reviewing mergers. The framework marks growing co-operation between antitrust regulators and brings multinational acquirers new concerns.
Confidentiality. The EC and MOFCOM agree that, where confidential information is shared between the regulators pursuant to a waiver, each side will ensure the protection of business secrets and other confidential information. When information is provided to either the EC or MOFCOM, it will typically contain extensive information about the parties to the transaction, much of which is confidential and/or constitutes business secrets.
In the EU and in China, the EC and MOFCOM are obliged to keep this confidential, and only use it for the purpose for which it was provided, i.e. reviewing the transaction in their own jurisdiction. The framework, like other co-operation agreements, does not override this duty. However, in practice, both authorities may ask for waivers that allow this information to be exchanged. While technically voluntary, such waivers are normally given as a means of demonstrating effective co-operation.
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Co-ordinated information requests. The framework indicates that the EC and MOFCOM may co-ordinate information requests where this is “necessary”, including exchanging draft questionnaires in advance.
Liaison. The EC and MOFCOM may designate a liaison offer regarding case co-operation when grating waiver requests.
Broader landscape
China’s two other anti-monopoly enforcement agencies, the National Development and Reform Commission (NDRC) and the State Administration for Industry and Commerce (SAIC), have separate agreements with the EC.
Both agencies have also signed new bilateral agreements in recent months. The NDRC signed a memorandum of understanding (MoU) with the Japan Fair Trade Commission on 13 October, and with the Australian Competition and Consumer Commission on 5 November, among others. The SAIC signed an MoU with the Russian Federal Antimonopoly Service last September.
These agreements demonstrate that China’s competition agencies value international co-operation, and intend to benefit from, and shape, multinational investigations in years to come.
To date, there is no public information available as to whether, and how often, the NDRC and SAIC have co-operated with the EC and other overseas regulators on specific matters. Last year, the NDRC imposed fines in two auto parts cases where the companies were subject to proceedings in other jurisdictions.
Practical implications
In practice, growing cross-border co-operation between the regulators means that parties to multinational transactions should develop and deploy a consistent story to those antitrust agencies. Substantive differences probably exist between jurisdictions with respect to market definition, theories of harm or efficiency arguments, etc., so the parties and their legal advisers will need to ensure that these are explained.
While the bilateral co-operation agreements do not override each authority’s duty to keep filing materials confidential, authorities will often ask for “waivers” to allow such materials to be shared, for example between MOFCOM and the EC. Parties should consider offering these at an early stage, where inter-agency co-operation may be helpful.
Such contacts may ultimately benefit merging parties, allowing for issues to be dealt with more efficiently, as well as allowing MOFCOM to further develop and build its expertise in handling large and complicated deals.
Outside of a merger context, defendants in cartel and other investigations should consider their international strategy carefully, particularly where China may have been involved.
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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-mailing Danian Zhang (Shanghai) at:danian.zhang@bakermckenzie.com
