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Home > Anti-Monopoly Law
New Guidance on Antitrust Notifications in China

On June 6, 2014, the Ministry of Commerce of China issued a new version of Guiding Opinions on the Declaration of Concentration of Undertakings that had been issued previously on January 5, 2009 (the “Guiding Opinions”).  Compared with the old Guiding Opinions, the new Guiding Opinions has some new characteristics as follows:

 

Control for Concentration


According to the new Guiding Opinions, the control in the concentration of undertakings includes individual control and joint control.  It depends on a lot of legal and factual elements to decide if an undertaking gains control over other undertakings or exert decisive influence over other undertakings by a transaction.  

It is important to look into a concentrating agreement or the articles of association of other undertakings to decide if there is a shift of control, but there are some other factors to double check such as:
-What is the purpose of the transaction and the prospective business plan
-What is shareholding structure before and after a transaction
-What are the items for voting and voting mechanisms of the shareholders meeting and how voting was conducted
-How is the board of directors or the board of supervisors made and what is their voting mechanism
-How are executive managers appointed or dismissed
-What is the relation between shareholders and directors, for example if there are proxy voting rights or persons acting in concert
-If there is any significant business relationship between the concerned undertaking and some other undertakings.

Any undertaking can take control directly or indirectly by an undertaking under its control.
 
For a newly established joint venture, it is concentration if there are at least two undertakings jointly controlling this joint venture.  It is not a concentration if there is only one undertaking controlling this joint venture individually.

 

Calculation of Turnover


For a concentration where a seller sells a part or several parts of this undertaking, if the seller does not control over what is sold out, it is unnecessary to calculate the entire turnover of the undertaking.  In other words, as far as this concentration is concerned, it is what this seller sold out is taken into account when calculating the turnover of the transaction.  Therefore, if the seller sells its assets and does not control the assets that were sold, it is the revenue that these assets generated is taken into account to calculate the turnover of the whole transaction.  If a seller sells a part or all parts of the shares of a target company and if the seller does not have any control over the target company after the transaction, it is the revenue that the target company generates is taken into account when calculating the turnover of the concentration.

Pre-notification Inquiry
 
Any undertaking could make a pre notification inquiry with the MOFCOM regarding a filing or potential filing.  A pre-notification inquiry must be made in writing the fax or email, which shall include the following information regarding the transaction: the basic information of concentrating parties; subject matters of inquiry; the name, nationality, enterprise and the titles of the person that make such an inquiry; the time proposed to discuss on; the contact person and their contact details.
 
The transaction subject to inquiry must be real and relatively certain, and must be directly related with the filing that is made or to be made.
 
That issues subject to inquiry could include the following:
-Whether a transaction is reportable, which includes weather a transaction is a concentration, and whether the filing criteria have been reached
-What documents and the data are to be filed with MOFCOM
-What are concrete legal and factual questions to raise, including how to determine what is the relevant product market and the relevant geographic market, or if the filing could be made in a simplified way
-What are the filing and examination procedures including when and who to make a filing, the timing and procedure of making such a filing, if it is all right to make a simplified filing. 

 

Compared with the old Guiding Opinions, the new Guiding Opinions are more practical and guiding-oriented as MOFCOM has absorbed all of the tips and lessons that were accumulated in the past six years since China’s Anti-Monopoly Law took effect as of August 1, 2008.

 

For the Chinese version of the New Guiding Opinions, please follow the link.

 

 

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