On 29 June 2026, the State Administration for Market Regulation of China (“SAMR”) announced its decision to impose a fine of RMB 1.75 million (approximately US$ 258,100) each on Zhongshan Torch Group Co., Ltd. (“Torch Group”) and Shanghai Dinghui Baifu Investment Management Co., Ltd. (“Dinghui Baifu”) for acquiring control of Jonjee Hi-tech Industrial (Group) Co., Ltd. (“Jonjee”) through other means (SAMR Penalty Decision [2026] No. 27). This case is another landmark enforcement action applying Article 58 of the Anti-Monopoly Law of the People’s Republic of China (“AML”) to penalize “gun‑jumping” and procedural violations. The core takeaway is that a transaction that is lawful and has been voluntarily notified is nonetheless deemed illegal because the change of control was implemented prematurely during the statutory waiting period. This signals that the procedural red line for merger review in China has extended from “whether to notify” to “when to implement” – the waiting period is no longer a suggested buffer but a legally binding and inviolable prohibition. Regardless of whether a transaction causes competitive harm, a procedural violation alone can trigger substantial fines.
Case Overview
Torch Group is a state-owned industrial capital enterprise established in Guangdong Province in 1992, primarily engaged in land development, leasing and property management, real estate sales, and water supply. Dinghui Baifu is a well-known private equity fund established in Shanghai in 2014, engaged in private equity investment management. The target company, Jonjee, is an A-share listed company established in Guangdong Province in 1993, primarily engaged in seasoned food products, industrial park property development and operation, and commercial residential development and sales.
On 18 January 2023, Jonjee announced that Shanghai Dinghui Juanyu Investment Partnership and Jiaxing Dinghui Anye Equity Investment Partnership, established by Dinghui Baifu, had entered into a persons‑acting‑in‑concert agreement with Torch Group. On 2 July, these acting‑in‑concert parties jointly convened an extraordinary general meeting, intending to acquire control of Jonjee through a board reshuffle. On 3 July, Torch Group and Dinghui Baifu jointly submitted a merger notification to SAMR. On the same day, SAMR entrusted the Shanghai Municipal Administration for Market Regulation to review the case. However, during the review period, on 24 July, Jonjee convened the extraordinary general meeting and completed the board reshuffle, with Torch Group and Dinghui Baifu securing more than half of the board seats (5 out of 8 directors), thereby acquiring joint control of Jonjee at the board level.
On 31 December 2025, SAMR formally initiated an investigation pursuant to the AML and the Regulations on the Review of Concentrations of Undertakings. On 31 January 2026, SAMR decided to conduct further investigation and assessed whether the concentration would have the effect of eliminating or restricting competition. After assessment, SAMR determined that the concentration did not have the effect of eliminating or restricting competition, but the premature acquisition of control constituted an illegal implementation of a concentration. In light of the fact that Torch Group and Dinghui Baifu were first‑time offenders, cooperated fully with the investigation, provided truthful statements and important evidence, and had established and effectively implemented an anti‑monopoly compliance management system, SAMR, in accordance with the AML and the Discretionary Benchmark for Administrative Penalties for Illegal Implementation of Concentrations of Undertakings (Trial) (the “Penalty Benchmark”), ultimately reduced the fines and imposed RMB 1.75 million (approximately US$ 258,100) each on the two parties.
Board Reshuffle as a “Concentration of Undertakings”
Article 25 of the AML provides that concentrations of undertakings include “acquisition of control over other undertakings through acquisition of equity or assets” and “acquisition of control over other undertakings, or the ability to exercise decisive influence over other undertakings, by means of contracts or other means.”
In this case, the transaction structure involved the completion of a board reshuffle through a shareholders’ meeting. After the extraordinary general meeting, the acting‑in‑concert parties occupied 5 out of 8 board seats. According to Jonjee’s articles of association, the board of directors must approve core matters – including operational plans, investment proposals, annual budgets and final accounts, and appointment and removal of senior management – by a majority of all directors. On this basis, SAMR determined that even without acquiring more than 50% of the equity or becoming the single largest shareholder, Torch Group and Dinghui Baifu, by virtue of this structural board advantage, had acquired “joint control” over the listed company, thereby constituting a notifiable concentration of undertakings.
This reasoning is highly consistent with the “decisive influence” standard under EU competition law and provides an exceptionally clear and stringent quantitative indicator for determining control under Chinese law: obtaining a majority of board seats can directly equate to acquiring control. This means that in listed company takeover battles involving board seat changes, a seemingly innocuous proposal to “reshuffle the board” may simultaneously trigger a re‑evaluation of anti‑trust notification obligations.
Comparison with the Luxshare Precision Case
Comparing this case with SAMR’s penalty decision (SAMR Penalty Decision [2026] No. 26) on 21 May 2026 against Luxshare Precision Industry Co., Ltd. (“Luxshare Precision”) for illegally implementing the concentration of the acquisition of part of Wingtech Technology Co., Ltd.’s business (“Luxshare Precision Case”), the differences in how Chinese enforcement authorities distinguish between two types of procedural violations and their respective sentencing logics become evident.
In the Luxshare Precision Case, the party acquired 100% of the target business’s equity through a subsidiary and completed the equity transfer registration swiftly on 26 and 27 January 2026, thereby achieving sole control. The transaction met the notification threshold, but Luxshare Precision completed the closing without prior approval and only afterwards voluntarily filed a belated notification, constituting a “failure to notify before implementation”. Given that the concentration did not have the effect of eliminating or restricting competition, and that Luxshare Precision voluntarily reported before SAMR became aware of the violation, actively rectified, and established effective anti‑monopoly compliance systems, SAMR ultimately imposed a fine of RMB 900,000 (approximately US$ 132,800).
The commonality between the two cases is that both were treated as purely procedural violations without competitive harm, and both were penalized under Article 58 of the AML within the cap of RMB 5 million (approximately US$ 737,500). This reaffirms that competitive harm and procedural compliance are two parallel red lines; absence of harm does not excuse procedural violations. The differences, however, lie in the nature of the violation and the factors affecting the fine amount.
First, voluntary reporting is a decisive mitigating factor. The reason the fine in the Luxshare Precision Case was kept below RMB 1 million (approximately US$ 147,500) was primarily that the party qualified for the statutory mitigating circumstance of “voluntarily reporting before the authority became aware of the illegal concentration”. This is analogous to a “voluntary surrender” in administrative law and reflects the enforcement authority’s strong encouragement of proactive self‑correction. Luxshare Precision thus obtained a significant discount on the fine.
Second, conscious and deliberate violation is a key aggravating factor. In this case, the parties were not unaware of the notification obligation; they had already submitted a notification on 3 July 2023. The violation arose from their decision to convene the extraordinary general meeting to complete the change of control only 21 days after notification, effectively “jumping the gun” during the review period. This conduct directly violated Article 30 of the AML, which provides that “operators shall not implement the concentration before the decision is made”, and constitutes a deliberate disregard for the review procedure. Compared to a failure to notify due to oversight, the act of notifying but not waiting for approval is clearly assigned greater negative weight in sentencing. Although the parties obtained a reduction through cooperation and compliance measures, the absence of the decisive mitigating factor of “voluntary self‑reporting” resulted in a fine significantly higher than in the Luxshare Precision Case.
Third, an effective compliance system serves as a mitigating factor. The decision in this case explicitly cites “the establishment and effective implementation of an anti‑monopoly compliance management system” as a factor for leniency. Its legal basis is Article 9 of the Penalty Benchmark. While the Luxshare Precision decision also mentioned that the party had established an anti‑monopoly compliance system, this case more prominently announced it as a ground for mitigation, sending a stronger signal. Notably, the requirement of “effective implementation” indicates that SAMR does not merely accept a paper‑based compliance manual but examines the actual operation of the system. To avail themselves of this mitigating factor, companies are advised to retain evidence such as compliance training records, assessment working papers, and violation handling files that demonstrate the system’s effective functioning, in order to support their position in any investigation.
Conclusion
Through this case, SAMR has alerted all business operators that when taking actions in concert with other companies to acquire control of a listed company, where the transaction meets the notification threshold, strict compliance with the notification requirement and implementation only after approval is mandatory, and “gun‑jumping” must be resolutely avoided. At the same time, active cooperation during investigations and the establishment and effective implementation of an anti‑monopoly compliance management system constitute important avenues for securing leniency or mitigation of penalties.
Case Overview
Torch Group is a state-owned industrial capital enterprise established in Guangdong Province in 1992, primarily engaged in land development, leasing and property management, real estate sales, and water supply. Dinghui Baifu is a well-known private equity fund established in Shanghai in 2014, engaged in private equity investment management. The target company, Jonjee, is an A-share listed company established in Guangdong Province in 1993, primarily engaged in seasoned food products, industrial park property development and operation, and commercial residential development and sales.
On 18 January 2023, Jonjee announced that Shanghai Dinghui Juanyu Investment Partnership and Jiaxing Dinghui Anye Equity Investment Partnership, established by Dinghui Baifu, had entered into a persons‑acting‑in‑concert agreement with Torch Group. On 2 July, these acting‑in‑concert parties jointly convened an extraordinary general meeting, intending to acquire control of Jonjee through a board reshuffle. On 3 July, Torch Group and Dinghui Baifu jointly submitted a merger notification to SAMR. On the same day, SAMR entrusted the Shanghai Municipal Administration for Market Regulation to review the case. However, during the review period, on 24 July, Jonjee convened the extraordinary general meeting and completed the board reshuffle, with Torch Group and Dinghui Baifu securing more than half of the board seats (5 out of 8 directors), thereby acquiring joint control of Jonjee at the board level.
On 31 December 2025, SAMR formally initiated an investigation pursuant to the AML and the Regulations on the Review of Concentrations of Undertakings. On 31 January 2026, SAMR decided to conduct further investigation and assessed whether the concentration would have the effect of eliminating or restricting competition. After assessment, SAMR determined that the concentration did not have the effect of eliminating or restricting competition, but the premature acquisition of control constituted an illegal implementation of a concentration. In light of the fact that Torch Group and Dinghui Baifu were first‑time offenders, cooperated fully with the investigation, provided truthful statements and important evidence, and had established and effectively implemented an anti‑monopoly compliance management system, SAMR, in accordance with the AML and the Discretionary Benchmark for Administrative Penalties for Illegal Implementation of Concentrations of Undertakings (Trial) (the “Penalty Benchmark”), ultimately reduced the fines and imposed RMB 1.75 million (approximately US$ 258,100) each on the two parties.
Board Reshuffle as a “Concentration of Undertakings”
Article 25 of the AML provides that concentrations of undertakings include “acquisition of control over other undertakings through acquisition of equity or assets” and “acquisition of control over other undertakings, or the ability to exercise decisive influence over other undertakings, by means of contracts or other means.”
In this case, the transaction structure involved the completion of a board reshuffle through a shareholders’ meeting. After the extraordinary general meeting, the acting‑in‑concert parties occupied 5 out of 8 board seats. According to Jonjee’s articles of association, the board of directors must approve core matters – including operational plans, investment proposals, annual budgets and final accounts, and appointment and removal of senior management – by a majority of all directors. On this basis, SAMR determined that even without acquiring more than 50% of the equity or becoming the single largest shareholder, Torch Group and Dinghui Baifu, by virtue of this structural board advantage, had acquired “joint control” over the listed company, thereby constituting a notifiable concentration of undertakings.
This reasoning is highly consistent with the “decisive influence” standard under EU competition law and provides an exceptionally clear and stringent quantitative indicator for determining control under Chinese law: obtaining a majority of board seats can directly equate to acquiring control. This means that in listed company takeover battles involving board seat changes, a seemingly innocuous proposal to “reshuffle the board” may simultaneously trigger a re‑evaluation of anti‑trust notification obligations.
Comparison with the Luxshare Precision Case
Comparing this case with SAMR’s penalty decision (SAMR Penalty Decision [2026] No. 26) on 21 May 2026 against Luxshare Precision Industry Co., Ltd. (“Luxshare Precision”) for illegally implementing the concentration of the acquisition of part of Wingtech Technology Co., Ltd.’s business (“Luxshare Precision Case”), the differences in how Chinese enforcement authorities distinguish between two types of procedural violations and their respective sentencing logics become evident.
In the Luxshare Precision Case, the party acquired 100% of the target business’s equity through a subsidiary and completed the equity transfer registration swiftly on 26 and 27 January 2026, thereby achieving sole control. The transaction met the notification threshold, but Luxshare Precision completed the closing without prior approval and only afterwards voluntarily filed a belated notification, constituting a “failure to notify before implementation”. Given that the concentration did not have the effect of eliminating or restricting competition, and that Luxshare Precision voluntarily reported before SAMR became aware of the violation, actively rectified, and established effective anti‑monopoly compliance systems, SAMR ultimately imposed a fine of RMB 900,000 (approximately US$ 132,800).
The commonality between the two cases is that both were treated as purely procedural violations without competitive harm, and both were penalized under Article 58 of the AML within the cap of RMB 5 million (approximately US$ 737,500). This reaffirms that competitive harm and procedural compliance are two parallel red lines; absence of harm does not excuse procedural violations. The differences, however, lie in the nature of the violation and the factors affecting the fine amount.
First, voluntary reporting is a decisive mitigating factor. The reason the fine in the Luxshare Precision Case was kept below RMB 1 million (approximately US$ 147,500) was primarily that the party qualified for the statutory mitigating circumstance of “voluntarily reporting before the authority became aware of the illegal concentration”. This is analogous to a “voluntary surrender” in administrative law and reflects the enforcement authority’s strong encouragement of proactive self‑correction. Luxshare Precision thus obtained a significant discount on the fine.
Second, conscious and deliberate violation is a key aggravating factor. In this case, the parties were not unaware of the notification obligation; they had already submitted a notification on 3 July 2023. The violation arose from their decision to convene the extraordinary general meeting to complete the change of control only 21 days after notification, effectively “jumping the gun” during the review period. This conduct directly violated Article 30 of the AML, which provides that “operators shall not implement the concentration before the decision is made”, and constitutes a deliberate disregard for the review procedure. Compared to a failure to notify due to oversight, the act of notifying but not waiting for approval is clearly assigned greater negative weight in sentencing. Although the parties obtained a reduction through cooperation and compliance measures, the absence of the decisive mitigating factor of “voluntary self‑reporting” resulted in a fine significantly higher than in the Luxshare Precision Case.
Third, an effective compliance system serves as a mitigating factor. The decision in this case explicitly cites “the establishment and effective implementation of an anti‑monopoly compliance management system” as a factor for leniency. Its legal basis is Article 9 of the Penalty Benchmark. While the Luxshare Precision decision also mentioned that the party had established an anti‑monopoly compliance system, this case more prominently announced it as a ground for mitigation, sending a stronger signal. Notably, the requirement of “effective implementation” indicates that SAMR does not merely accept a paper‑based compliance manual but examines the actual operation of the system. To avail themselves of this mitigating factor, companies are advised to retain evidence such as compliance training records, assessment working papers, and violation handling files that demonstrate the system’s effective functioning, in order to support their position in any investigation.
Conclusion
Through this case, SAMR has alerted all business operators that when taking actions in concert with other companies to acquire control of a listed company, where the transaction meets the notification threshold, strict compliance with the notification requirement and implementation only after approval is mandatory, and “gun‑jumping” must be resolutely avoided. At the same time, active cooperation during investigations and the establishment and effective implementation of an anti‑monopoly compliance management system constitute important avenues for securing leniency or mitigation of penalties.