China: Another Small Step Forward: China Further Clarifies Its Notification Procedure For Simple M&A Transactions

Earlier this year, China's Ministry of Commerce ("MOFCOM") implemented new regulations under the Anti-Monopoly Law ("AML") enabling "simple" M&A and joint venture transactions to be eligible for a potentially shorter and less burdensome "summary procedure." (See our prior alert here on the Tentative Provisions on the Applicable Standards Relating to the Summary Procedure for Cases of Concentration of Business Operators (关于经营者集中简易案件适用标准的暂行规定; "Tentative Summary Procedures"). MOFCOM has recently issued additional procedural rules (i.e., the Guiding Opinion on Filing of the Simple Cases of Concentration of Business Operators (Trial) (关于经营者集中简易案件申报的指导意见(试行 ), "Guiding Opinion"), as well as a simplified notification form and a "public notice" form, to clarify certain aspects of the operation and requirements of this new summary procedure.

While the Guiding Opinion provides further helpful clarity on how MOFCOM intends to implement the Tentative Summary Procedures, merging parties in seemingly "simple cases" are likely to continue to face some uncertainty and risk regarding the summary procedure's precise nature, scope and timing. Below we summarize the provisions of the Guiding Opinion and its key implications to parties involved in transactions requiring a China AML filing.

I. SUMMARY OF GUIDING OPINION

The Guiding Opinion provides additional details regarding the procedures that MOFCOM will utilize and that merging parties should follow for eligible "simple cases," including the following steps:

A. Consultation. Before making a summary AML filing, a notifying party may elect to consult with the Anti-Monopoly Bureau of MOFCOM ("AMB") regarding whether the transaction will qualify as a simple case and a summary AML filing. The consultation appointment application should be made in writing.

B. Notification and Public Notice Forms. A notifying party choosing to make a summary AML filing is required to submit a newly published simplified case notification form ("Simplified Form"), as well as a Form of Public Announcement of Simple Case of Business Operators' Concentration ("Public Notice Form").

The Simplified Form is similar in many respects to the standard notification form and requires the parties to provide a significant amount of information, including the following materials and documents:

  • A description and copy of the transaction agreement
  • Information regarding the parties to the transaction, including basic corporate information, worldwide and China sales revenue, the identity of affiliates and the ultimate controlling entity, and a list of major shareholders
  • Financial reports of each of the parties involved in the transaction
  • Market research reports prepared by the parties or third parties
  • A description of the relevant product and geographic market(s), the transaction's rationale, and its effects on competition in the relevant market(s)

The Simplified Form, however, eliminates certain sections of the standard notification form, including the necessity to provide the names and contact information of major suppliers and customers, detailed descriptions on the supply and demand structure of the market, the transaction's expected efficiencies, an analysis of entry barriers and entry events, cooperation agreements relating to the relevant markets, and the parties' scale and competition in other markets.

The Public Notice Form requires the following information:

  • name of the case
  • summary of the proposed concentration (within 200 Chinese characters)
  • brief overview of the parties involved in the transaction
  • election of the grounds on which the case is a simple case
  • other remarks (if any)

C. Filing Acceptance. The AMB will review the filing documents and materials and determine whether the proposed transaction qualifies as a "simple case" eligible for the summary procedures. Before accepting a summary AML filing, the AMB may request the notifying party to supplement, amend, clarify or explain the filing documents if AMB views that the filing documents and materials are incomplete or contain inaccurate statements. The AMB also retains discretion to determine that a case does not qualify for the summary AML filing procedure and require the notifying party to submit the standard notification form. Before the AMB makes such a decision, however, it will hear the notifying party's opinion and verify facts, reasons and evidence provided by such notifying party.

D. Public Announcement. Once the AMB accepts the summary AML filing and commences the Phase 1 review period, it will publicly post the content of the Public Notice Form on its portal at http://fldj.mofcom.gov.cn . This public announcement will trigger a 10-calendar-day period during which any entity or individual may submit to AMB their objection to the case's eligibility as a simple case, along with relevant evidence and their contact information.

E. AMB's Decision on Summary Filing Procedure. If there are no comments during the public comment period, then the transaction will be reviewed and treated as a simplified case. If objections are received, the AMB will review the relevant evidence and hear the notifying party's opinions. The AMB has the authority to revoke its earlier determination that the transaction qualifies for the summary procedure and require the parties to submit a standard notification form. If an objection is not verifiable or substantiated, however, the AMB will reject such objection and will review the transaction under the summary procedure.

F. False and Misleading Information. If a notifying party omits material information or provides false materials and/or misleading information, the AMB may, in addition to revoking its determination that the case was qualified for summary AML filing procedure, impose administrative fines or pursue criminal liabilities.

II. KEY OBSERVATIONS

The Guiding Opinion represents another incremental positive step in the development of China's merger review system. The new procedural rules contain concrete changes to the notification form and review process that offer merging parties in "simple cases" the prospect of a less burdensome and potentially quicker review process. In addition, the use of the public notice process appears to be designed, in part, to streamline the process for obtaining feedback from interested stakeholders (e.g., customers, suppliers) and other relevant government agencies, which has resulted in delays in completing the pre-existing review process for standard notifications in the past.

Nevertheless, until we observe how the AMB will utilize these new procedures in practice on actual notifiable transactions, a number of uncertainties and risks will remain. For example:

  • The Guiding Opinion does not contain any prescribed time period in which the AMB must make a determination on whether the transaction qualifies as a simple case and provides no guidance or promises on how quickly MOFCOM will issue approval decisions. Thus, it remains unclear whether parties to transactions that qualify as a "simple case" can expect the initial Phase 1 review period to be commenced promptly after submitting a filing. Moreover, while we believe MOFCOM will aim to issue approval decisions more promptly for a simple case, it has broad discretion and authority to initiate an extended Phase 2 investigation if it needs additional time to make a final decision (even when there are no substantive concerns about the transaction).
  • Parties that elect to pursue the summary procedure also run the risk that the AMB rejects their simple case application or later revokes its determination that the transaction qualified for the summary procedure. If this occurs, the parties will essentially have to start the review process over by submitting the longer standard notification form. This could potentially result in a longer overall review period than choosing from the outset to submit a standard notification form. Likewise, the potential benefits of the Simplified Form may be negated if parties choose to mitigate this risk and minimize delays by collecting and including the additional information required in the standard notification form in their initial submissions.
  • Finally, the public announcement process may attract attention and objections from third parties that may not have otherwise been contacted by the AMB or become aware of a transaction.

Accordingly, parties to transactions requiring a China AML notification should exercise caution and consult with knowledgeable counsel when determining whether to request treatment as a simple case under the summary procedures.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Jing Bu
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions