On October 11, 2024, the State Administration for Market Regulation (SAMR) held a press conference regarding its merger supervision system.
The said meeting introduced a series of works regarding the merger review by the SAMR this year, including but not limited to, amending and introducing the new declaration criteria for the undertaking concentration, conducting the pilot commissioning for the mid-term evaluation, optimizing the review ideas for simplified cases, simplifying the declaration materials for simplified cases, etc.
According to the SAMR, it made a significant amendment to the Provisions of the State Council on Notification Thresholds for Concentrations Between Undertakings, which greatly improve the thresholds for the concentrations; simplified and issued the application materials for the simple cases of concentrations that have carried out online since October 12, 2024; and drafted and solicited opinions for the Guidelines for the Review of Horizontal Concentrations of Undertakings, as well as drafted the Guidelines for the Review of Non-Horizontal Concentrations of Undertakings; etc.
[Comment]
The said meeting displayed the effort and result of the SAMR’s work to improve the efficiency of the merger review. For instance, according to the statistics announced in the said meeting by the SAMR, it received a total of 502 declarations of the concentrations of undertakings and concluded 455 of them, with an average acceptance time of 18.9 days and an average conclusion time of 26.2 days; among them, there are an average acceptance time of 16.4 days and an average conclusion time of 17.3 days for the simple cases, which makes the efficiency of the review ranked among the top among the world's major jurisdictions.
It is worth noting that the current legal frame regarding the concentrations of undertakings in China includes laws and regulations, but not limited to, as follows:
[The Anti-monopoly Law (2022 Amendment)]
Chapter 4 of the Anti-monopoly Law (Articles 25-38) is dedicated to the concentrations of undertakings, which lays out the basic rules regarding the said topic from the perspective of the anti-monopoly review, such as the definition, declaration materials, time limit, consideration factors, decisions, etc. of the concentration of undertakings.
For instance, Articles 26 and 27 of the Anti-monopoly provide some general rules for the declaration of the concentrations of undertakings and their exclusion. The former provides that “If an undertaking's concentration reaches the declaration standard stipulated by the State Council, the undertaking shall make a declaration to the antimonopoly enforcement agency of the State Council in advance, and the concentration shall not be carried out if it has not been declared. If an undertaking's concentration does not meet the declaration standard prescribed by the State Council, but there is evidence proving that the concentration has or may have the effect of excluding or restricting competition, the antimonopoly enforcement agency of the State Council may require the undertaking to make a declaration. …”; whereas the latter lists two circumstances that may not declare to the antimonopoly enforcement agency of the State Council, which are “(1) Where one undertaking participating in the concentration owns more than fifty per cent of the voting shares or assets of each of the other undertaking; (2) Fifty per cent or more of the voting shares or assets of each undertaking participating in the concentration are owned by the same undertaking not participating in the concentration.”
[Provisions of the State Council on Notification Thresholds for Concentrations Between Undertakings (2024 Amendment)]
The Provisions herein was first made on August 3, 2008, and amended respectively in September 2018 and January 2024. It further specifies the declaration thresholds of the concentration of undertakings subsequent to the provisions of the Anti-monopoly Law above.
Article 3 of the Provisions herein provides that “Where an undertaking's concentration meets one of the following criteria, the undertaking shall make a declaration in advance to the antimonopoly enforcement agency under the State Council, and the concentration shall not be implemented if it has not been declared: (i) The combined worldwide turnover of all undertakings participating in the concentration for the previous fiscal year exceeds RMB 12 billion, and the turnover of at least two of the undertakings in China for the previous fiscal year exceeds RMB 800 million; (ii) The combined turnover of all undertakings participating in the concentration for the previous fiscal year in China exceeds RMB 4 billion, and the turnover of at least two of them for the previous fiscal year in China both exceeds RMB 800 million. The calculation of turnover shall take into account the actual situation of special industries and fields such as banking, insurance, securities, and futures, and the specific measures shall be formulated by the State Council's anti-monopoly enforcement agency in conjunction with the relevant departments of the State Council.” (https://www.gov.cn/zhengce/content/202401/content_6928387.htm)
[Notice by the State Administration for Market Regulation of Issuing the Guidelines for Anti-monopoly Compliance in Concentrations Between Undertakings]
The Notice herein was issued and effective on September 5, 2023, and the Guidelines referred to in the said Notice aim at guiding and assisting enterprises in establishing a compliance management system for undertakings' concentration and promoting the healthy development of enterprises. For instance, Chapter 3 “Focused Compliance Risks” of the Guidelines is focusing on the issues to which attention should be paid in various aspects of the concentration of undertakings, including whether and when to declare, exclusion and restriction of competition, violation of the review decision, obstruction of the review and investigation, and overseas compliance risks, etc. The Chapter 4 “Compliance Risks Management” thereof mainly introduces how to formulate a targeted undertaking concentration compliance management system, in particular, recommending enterprises to embed undertaking concentration compliance audits in the investment and M&A decision-making process, and at the same time, clarifying the compliance management department, the compliance officer, and the key position holders regarding the undertaking concentration compliance recommendations and risk countermeasures.
It is worth noting that the Guidelines referred to in the Notice herein is not mandatory and are for reference only. It is up to the undertakings to improve their compliance management systems.
[Provisions on the Examination of Concentrations of Undertakings]
The Provisions herein was issued on March 10 and effective on April 15, 2023. Apart from specifying detailed rules for the review of the concentrations of undertakings (e.g., the procedure, suspension, time limit, considering factors, etc. involved in the review thereof), the said Provisions also improves the procedure for simple cases.
For instance, it specifies the circumstances that can be declared as simple case which include “(1) In the same relevant market, the sum of the market shares held by the undertakings involved in the concentration is less than fifteen percent; in the upstream and downstream markets, the market shares held by the undertakings involved in the concentration are both less than twenty-five percent; undertakings involved in the concentration that are not located in the same relevant market and do not have upstream and downstream relations hold a market share of less than twenty-five percent in each of the markets relevant to the transaction; (2) The undertaking participating in the concentration establishes a joint venture outside China, and the joint venture does not engage in economic activities in China; (iii) The undertaking participating in the concentration acquires the equity or assets of an overseas enterprise, and the overseas enterprise is not engaged in economic activities in China; (4) A joint venture that is jointly controlled by two or more undertaings and is controlled by one or more of them through concentration.
However, in case of one of the following circumstances, it shall be deemed a simple case even though it fulfills one of the circumstances above: (i) Where a joint venture that is jointly controlled by two or more undertakings is controlled by one of those undertakings through a concentration, and that undertaking and the joint venture are competitors in the same relevant market, and the sum of their market shares is greater than fifteen percent; (ii) Where the relevant market involved in the concentration of undertakings is difficult to define; (iii) Where the concentration of undertakings may have an adverse effect on market entry and technological progress; (iv) The concentration of undertakings may have adverse effects on consumers and other undertakings concerned; (v) The concentration of undertakings may have an adverse impact on the development of the national economy; (vi) Other circumstances that the SAMR believes may adversely affect market competition.”
Upon acceptance of a simple case, the SAMR will publish the basic information of a simple case for ten days.
The said meeting introduced a series of works regarding the merger review by the SAMR this year, including but not limited to, amending and introducing the new declaration criteria for the undertaking concentration, conducting the pilot commissioning for the mid-term evaluation, optimizing the review ideas for simplified cases, simplifying the declaration materials for simplified cases, etc.
According to the SAMR, it made a significant amendment to the Provisions of the State Council on Notification Thresholds for Concentrations Between Undertakings, which greatly improve the thresholds for the concentrations; simplified and issued the application materials for the simple cases of concentrations that have carried out online since October 12, 2024; and drafted and solicited opinions for the Guidelines for the Review of Horizontal Concentrations of Undertakings, as well as drafted the Guidelines for the Review of Non-Horizontal Concentrations of Undertakings; etc.
[Comment]
The said meeting displayed the effort and result of the SAMR’s work to improve the efficiency of the merger review. For instance, according to the statistics announced in the said meeting by the SAMR, it received a total of 502 declarations of the concentrations of undertakings and concluded 455 of them, with an average acceptance time of 18.9 days and an average conclusion time of 26.2 days; among them, there are an average acceptance time of 16.4 days and an average conclusion time of 17.3 days for the simple cases, which makes the efficiency of the review ranked among the top among the world's major jurisdictions.
It is worth noting that the current legal frame regarding the concentrations of undertakings in China includes laws and regulations, but not limited to, as follows:
[The Anti-monopoly Law (2022 Amendment)]
Chapter 4 of the Anti-monopoly Law (Articles 25-38) is dedicated to the concentrations of undertakings, which lays out the basic rules regarding the said topic from the perspective of the anti-monopoly review, such as the definition, declaration materials, time limit, consideration factors, decisions, etc. of the concentration of undertakings.
For instance, Articles 26 and 27 of the Anti-monopoly provide some general rules for the declaration of the concentrations of undertakings and their exclusion. The former provides that “If an undertaking's concentration reaches the declaration standard stipulated by the State Council, the undertaking shall make a declaration to the antimonopoly enforcement agency of the State Council in advance, and the concentration shall not be carried out if it has not been declared. If an undertaking's concentration does not meet the declaration standard prescribed by the State Council, but there is evidence proving that the concentration has or may have the effect of excluding or restricting competition, the antimonopoly enforcement agency of the State Council may require the undertaking to make a declaration. …”; whereas the latter lists two circumstances that may not declare to the antimonopoly enforcement agency of the State Council, which are “(1) Where one undertaking participating in the concentration owns more than fifty per cent of the voting shares or assets of each of the other undertaking; (2) Fifty per cent or more of the voting shares or assets of each undertaking participating in the concentration are owned by the same undertaking not participating in the concentration.”
[Provisions of the State Council on Notification Thresholds for Concentrations Between Undertakings (2024 Amendment)]
The Provisions herein was first made on August 3, 2008, and amended respectively in September 2018 and January 2024. It further specifies the declaration thresholds of the concentration of undertakings subsequent to the provisions of the Anti-monopoly Law above.
Article 3 of the Provisions herein provides that “Where an undertaking's concentration meets one of the following criteria, the undertaking shall make a declaration in advance to the antimonopoly enforcement agency under the State Council, and the concentration shall not be implemented if it has not been declared: (i) The combined worldwide turnover of all undertakings participating in the concentration for the previous fiscal year exceeds RMB 12 billion, and the turnover of at least two of the undertakings in China for the previous fiscal year exceeds RMB 800 million; (ii) The combined turnover of all undertakings participating in the concentration for the previous fiscal year in China exceeds RMB 4 billion, and the turnover of at least two of them for the previous fiscal year in China both exceeds RMB 800 million. The calculation of turnover shall take into account the actual situation of special industries and fields such as banking, insurance, securities, and futures, and the specific measures shall be formulated by the State Council's anti-monopoly enforcement agency in conjunction with the relevant departments of the State Council.” (https://www.gov.cn/zhengce/content/202401/content_6928387.htm)
[Notice by the State Administration for Market Regulation of Issuing the Guidelines for Anti-monopoly Compliance in Concentrations Between Undertakings]
The Notice herein was issued and effective on September 5, 2023, and the Guidelines referred to in the said Notice aim at guiding and assisting enterprises in establishing a compliance management system for undertakings' concentration and promoting the healthy development of enterprises. For instance, Chapter 3 “Focused Compliance Risks” of the Guidelines is focusing on the issues to which attention should be paid in various aspects of the concentration of undertakings, including whether and when to declare, exclusion and restriction of competition, violation of the review decision, obstruction of the review and investigation, and overseas compliance risks, etc. The Chapter 4 “Compliance Risks Management” thereof mainly introduces how to formulate a targeted undertaking concentration compliance management system, in particular, recommending enterprises to embed undertaking concentration compliance audits in the investment and M&A decision-making process, and at the same time, clarifying the compliance management department, the compliance officer, and the key position holders regarding the undertaking concentration compliance recommendations and risk countermeasures.
It is worth noting that the Guidelines referred to in the Notice herein is not mandatory and are for reference only. It is up to the undertakings to improve their compliance management systems.
[Provisions on the Examination of Concentrations of Undertakings]
The Provisions herein was issued on March 10 and effective on April 15, 2023. Apart from specifying detailed rules for the review of the concentrations of undertakings (e.g., the procedure, suspension, time limit, considering factors, etc. involved in the review thereof), the said Provisions also improves the procedure for simple cases.
For instance, it specifies the circumstances that can be declared as simple case which include “(1) In the same relevant market, the sum of the market shares held by the undertakings involved in the concentration is less than fifteen percent; in the upstream and downstream markets, the market shares held by the undertakings involved in the concentration are both less than twenty-five percent; undertakings involved in the concentration that are not located in the same relevant market and do not have upstream and downstream relations hold a market share of less than twenty-five percent in each of the markets relevant to the transaction; (2) The undertaking participating in the concentration establishes a joint venture outside China, and the joint venture does not engage in economic activities in China; (iii) The undertaking participating in the concentration acquires the equity or assets of an overseas enterprise, and the overseas enterprise is not engaged in economic activities in China; (4) A joint venture that is jointly controlled by two or more undertaings and is controlled by one or more of them through concentration.
However, in case of one of the following circumstances, it shall be deemed a simple case even though it fulfills one of the circumstances above: (i) Where a joint venture that is jointly controlled by two or more undertakings is controlled by one of those undertakings through a concentration, and that undertaking and the joint venture are competitors in the same relevant market, and the sum of their market shares is greater than fifteen percent; (ii) Where the relevant market involved in the concentration of undertakings is difficult to define; (iii) Where the concentration of undertakings may have an adverse effect on market entry and technological progress; (iv) The concentration of undertakings may have adverse effects on consumers and other undertakings concerned; (v) The concentration of undertakings may have an adverse impact on the development of the national economy; (vi) Other circumstances that the SAMR believes may adversely affect market competition.”
Upon acceptance of a simple case, the SAMR will publish the basic information of a simple case for ten days.