February 01, 2009

Guiding Opinions on Merger Control Notification and Relevant Markets

Guiding Opinions on Merger Control Notification

Issuing Body: Ministry of Commerce
Issuing Date: January 5, 2009
Effective Date:         January 5, 2009

Guiding Opinions on Application Materials for Merger Control Notification

Issuing Body: Ministry of Commerce
Issuing Date: January 5, 2009
Effective Date:         January 5, 2009

Draft Guidelines on Recognition of Relevant Market

Issuing Body: Ministry of Commerce
Issuing Date: January 5, 2009
Effective Date:         January 5, 2009

The Standing Committee of China's National People's Congress adopted the PRC Anti-Monopoly Law in August 2007, after years of internal and external debate. That law, which took more than a decade to draft and enact, attempted for the first time to systematically define and regulate antitrust law and antitrust law enforcement throughout China. We summarized this landmark legislation, which became effective on August 1, 2008, first in draft form (China Law Update, August 2007) and ultimately, as enacted, in the October 2007 issue of China Law Update. Similarly, we summarized key implementing rules, known as the Regulations on Notification of a Concentration of Undertakings, in the September 2008 issue of China Law Update.

Three government agencies share responsibility for enforcing China's Anti-Monopoly Law: the Ministry of Commerce (MOFCOM; merger control), the National Development and Reform Commission (NDRC; price fixing) and the State Administration of Industry and Commerce (SAIC; abuse of dominant market position). Among the three agencies, MOFCOM plays the most important role, particularly through its Anti-Monopoly Bureau.

MOFCOM officials were active in January. In addition to establishing an administrative service center that specializes in receiving and transferring application materials for merger control notifications (the Merger Control Service Center), MOFCOM's Anti-Monopoly Bureau issued three sets of rules on January 5, 2009, to implement and facilitate merger control review under the Anti-Monopoly Law:

  • Guiding Opinions on Merger Control Notification (the Notification Opinions);
  • Guiding Opinions on Application Materials for Merger Control Notification (Application Materials Opinions); and
  • Draft Guidelines on Recognition of Relevant Market.

These rules help to clarify uncertainties concerning the Anti-Monopoly Law by stipulating procedures and documentation requirements for the filing process, as well as a draft of a methodology for recognizing a "relevant market" to assess the effect of a proposed merger or concentration on competition. Though the requirements might seem burdensome to applicants, they show, in some respects, the Chinese government's desire to better implement the Anti-Monopoly Law and bring the country's entire anti-monopoly regime in line with international practices.

Merger Control Notification Procedures

The Notification Opinions supplement and make specific the merger control notification procedures contained in the Anti-Monopoly Law, providing as follows:

Step 1. Pre-notification discussion with the Anti-Monopoly Bureau. The pre-notification discussion is not mandatory, but is rather suggested by MOFCOM before an official filing.

Step 2. Submission of application materials to the Merger Control Service Center. Reservation with MOFCOM of a time for filing is also recommended.

Step 3. Preliminary review of notification materials. If the application materials are accepted, an information registration form (Registration Form) will be issued. However, issuance of the Registration Form does not necessarily mean the application materials are complete; the Anti-Monopoly Bureau may still require supplements, amendments or explanations.

Step 4. Initial review. Initial review begins from the date application materials are deemed to be in compliance with Article 23 of the Anti-Monopoly Law, and will last for at most 30 days.

Step 5. Secondary Review. The Anti-Monopoly Bureau is entitled, at its own discretion, to begin a secondary review that may last at most 90 days.

Step 6. Prolonged Review. Anther 60 days' review may be initiated if the applicant agrees; if the application materials are not accurate, and need further verification; or if material changes occur after notification.

Step 7. Decision-making and notification. The Anti-Monopoly Bureau will only announce its decisions publicly if it forbids the proposed concentration or approves it with restrictive conditions. If the Anti-Monopoly Bureau has no objection, it will inform only the applicant, in writing.

Requirements for Application Materials

The Application Materials Opinions restate and supplement the requirements for application materials that must be submitted for a proposed concentration to meet approval. Key application materials are as follows:

  1. Application letter stating names, domiciles, business scopes, expected date for the proposed concentration, and other matters required by the Anti-Monopoly Bureau.

  1. Statement regarding the effect of the proposed concentration on the competition status of the relevant market (Relevant Market).

  1. Business concentration agreement (including all supplemental documents and attachments).

  1. Audited financial report for the previous year of the relevant parties.

  1. Others documents required by the Anti-Monopoly Bureau.

Application materials must be submitted in both paper and electronic form. Applicants shall provide two versions of the application materials: One is publishable and the other is confidential.

Recognition of Relevant Market

The Draft Relevant Market Guidelines are a proposed set of guidelines concerning the recognition of relevant markets for a proposed concentration. The consultation period for public comment ended January 31, 2009.

Under the Anti-Monopoly Law, "Relevant Market" refers to the commodity scope or regional area within which two or more businesses compete against each other for specific commodities or services. Relevant Markets are usually categorized into two types: a commodity market or a regional market.

China Law Update will summarize these guidelines when MOFCOM releases the final version of its guidelines in the coming months

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