China: Developments to the Merger Control Regime in China

Last Updated: 22 April 2015
Article by Susan Ning, Hazel Yin, Al Wu, Sarah Eder and Lingbo Wei

On 4 December 2014, the Provisions of the Ministry of Commerce on Imposing Additional Restrictive Conditions on the Concentration of Business Operators (for Trial Implementation) (hereinafter the "Provisions of Restrictive Conditions") was officially enacted by the Ministry of Commerce of the People's Republic of China (MOFCOM), based on its 2013 draft version (hereinafter the "2013 Draft Provisions"). Restrictive conditions in merger reviews are also referred to as "merger remedies". Pursuant to Articles 28 and 29 of the Anti-monopoly Law (hereinafter "AML"), where a concentration of business operators will or may eliminate or restrict competition, MOFCOM may decide to attach restrictive conditions to its clearance decision in order to reduce the adverse impacts on competition. MOFCOM has given conditional clearance in 24 cases since AML came into effect. Given that the imposition of restrictive conditions on proposed transactions may impact heavily on the parties and the nature of the transaction, even altering the relevant market and development of the relevant industry, the publication of the Provisions of Restrictive Conditions will be of great significance not only to the merger review process, but also to the business decisions of the relevant companies.

The Provisions of Restrictive Conditions came into effect on 5 January 2015. At the same time, MOFCOM's Interim Regulations on Implementing the Divestiture of Assets or Businesses in Concentrations of Business Operators dated 5 July 2010 (hereinafter "the Regulations on Divestiture"), were repealed. The Provisions of Restrictive Conditions will become an important reference point for the enforcement of restrictive conditions. The Provisions of Restrictive Conditions contain 7 chapters addressing restrictive covenants, including when such covenants will be imposed, the mechanisms for supervising their implementation, the consequences of failing to comply, the procedure for amending them and when the obligations will come to an end .

A. Types of restrictive conditions

Article 3 of the Provisions of Restrictive Conditions describes three types of restrictive conditions which MOFCOM can impose on business operators: structural conditions, behavioural conditions and hybrid conditions that involve both structural and behavioural conditions. The structural conditions stipulated in Article 3 include the divestiture of tangible assets, intangible assets or relevant rights and interests. These permanently impact the structure of the relevant business. In contrast, behavioural conditions involve constraints on the future market conduct of the operators. Article 3 stipulates that behavioural conditions include making infrastructure available to the public, licensing key technologies and terminating exclusive agreements.

To date, in the 24 published cases which have been conditionally approved by MOFCOM, 15 cases involved behavioural conditions, 4 cases involved structural conditions and 5 cases involved hybrid conditions. The behavioural remedies stipulated in Article 3 of the Provisions of Restrictive Conditions have all already been applied in previous cases. For example, in the Acquisition of Motorola by Google (2012), a condition was imposed requiring Google to licence the Android platform free of charge and on an open-source basis; in the Acquisition of Nokia's Devices and Services Business by Microsoft (2014), a condition was imposed requiring the licensing of key technologies; in the Acquisition of Alcon Inc. by Novartis AG (2010), a condition was imposed requiring the termination of a sales and distribution agreement. Furthermore, a number of other behavioural conditions have been imposed in previous case, including prohibiting operators from increasing their shareholding in a company; requiring disclosure of competitive confidential information; requiring operators to make specific products available on the Chinese market; substantially changing the current business model of a company; and requiring operators not to sell their products at an unreasonably high price or to bundle the sale of their products. There were also conditions requiring operators to notify MOFCOM of any changes in equity holdings and to abide by obligations of FRAND.

B. Process overview of imposing structural conditions

According to the Provisions of Restrictive Conditions, the notifying party can propose restrictive conditions either before or after competition concerns are raised by MOFCOM. MOFCOM will then consult with the notifying parties in respect of such restrictive conditions, seeking relevant opinions and conducting an evaluation before making a decision. Once MOFCOM has made a decision to accept structural remedies, the operator which has agreed to divest part of its business ("the divestment obligor") will either arrange the relevant divestiture itself or, if it is unable to find an appropriate buyer, it will appoint a divestiture trustee to conduct the divestment in the relevant timeframe. MOFCOM can initiate a further review of the restrictive conditions, pursuant to an application by one of the parties concerned or of its own accord, to decide whether to vary or terminate the restrictive conditions.

We summarize the process for reviewing and terminating structural conditions below:

In addition, the Provisions of Restrictive Conditions also contain specific rules which address the requirements for selecting the potential buyer and supervising/divestiture trustee in the divestiture process. When selecting a buyer, the Provisions of Restrictive Conditions stipulate that: (1) the buyer must be independent of the business operators participating in the concentration; (2) the buyer must possess the necessary resources and abilities, and must be willing to use the divestiture to participate in market competition; (3) the buyer must have obtained any necessary approvals from other regulatory authorities; (4) the buyer must not purchase the divestiture using debt financing; (5) the buyer must comply any other requirements specified by MOFCOM. Where either a supervising trustee (in voluntary divestments) or a divestiture trustee (in entrusted divestments) is necessary, the trustee needs to be independent and have the necessary professional experience. The trustee and the notifying party need to sign a written agreement and comply with the responsibilities stipulated in the Provisions of Restrictive Conditions. The notifying party must submit the list of potential buyers and the signed purchase agreements, as well as the proposed supervising/divestiture trustee to MOFCOM. MOFCOM will then review the potential buyers and proposed trustee to ensure that all requirements are met.

It is worth mentioning that the Provisions of Restrictive Conditions allow the buyer to "apply to MOFCOM for necessary modifications to the scope of the divestiture." This did not feature in the 2013 draft for consultation. However, since MOFCOM's review decision will set out the scope of divestiture, it is unclear what will happen to the review decision if a buyer applies to modify the scope of the divestiture.

C. Special rules on imposing structural remedies

  1. Divestment before the concentration

Article 14 of the Provisions of Restrictive Conditions provides that the divestiture may be required to take place before the merger is completed. Generally, as shown in chart 1, the divestment is implemented after the publication of the review decision and the execution of the concentration. However, MOFCOM may require the divestment obligor to find a potential buyer and sign the sale and purchase agreement before the concentration is executed (see chart 2) or even before the publication of merger review decision1 (see chart 3), including cases where:

  • the divestment involves particular risks (for example, the relevant industry is unstable or there is a risk that the employees will be unsettled by the change of control);
  • the identity of the buyer has a significant influence on if the divestiture can restore competition in the market; and
  • a third party has brought legal proceedings against the business being divested.

In fact, the EU and US regimes both include similar provisions which enable the divestment to take place before the concentration is completed, known as "upfront buyer" or "fix-it-first", which are intended to lower the risks involved in structural remedies in order to protect and maintain competition in the market after the concentration has been implemented.

  1. Crown Jewel Rule

According to Article 7 of the Provisions of Restrictive Conditions, where the first choice of remedy submitted by the notifying party involves some risk, MOFCOM may require the notifying party to propose alternative solutions. Alternative solutions involve conditions that are more stringent than those in the remedy of first choice. The purpose of the Crown Jewel Rule is to urge the seller to submit a better solution which ensures that the divestment proceeds successfully.

MOFCOM applied the Crown Jewel Rule in the Glencore/Xstrata Case (2013), requiring Glencore to submit an alternative solution to avoid the risk that the divestiture would not proceed.

  1. Duration for behavioral conditions

The 2013 Draft Provisions included a provision that MOFCOM must specify the time period for implementing the behavioral conditions or, in the absence of such specification, the time period would be assumed to be ten years. This stipulation has been removed in the Provisions of Restrictive Conditions. This deletion is reasonable because development and innovation in different industries varies, and various factors need to be taken into account when determining the duration for implementing behavioral conditions. Therefore, the deletion enables MOFCOM to have more flexibility by taking into account the situation in different industries.

D. Conclusion

The Provisions of Restrictive Conditions set out the relevant concepts and rules for the merger remedy regime in a systematic and comprehensive way. In addition, the Provisions of Restrictive Conditions enables MOFCOM to require divestment before the concentration is implemented and introduces the "Crown Jewel Rule", which codifies MOFCOM's pre-existing practice. This not only ensures the stability of MOFCOM's review process, but also leaves room to continue developing the rules.

However, the Provisions of Restrictive Conditions do not particularly address behavioral remedies. Instead, the provisions state that the implementation and supervision of behavioral conditions shall comply with existing regulations applicable to structural conditions. The reason for this could be that there are numerous varieties of behavioral conditions, for which it is hard to provide an exhaustive list, and the imposition of behavioral remedies is very case-specific making it hard to provide general rules.

The Provisions of Restrictive Conditions significantly improve the regime for reviewing concentrations of business operators. They not only provide clear regulations for MOFCOM's future law enforcement, but also provide guidance for notifying parties to fully prepare for the review process based on the specific circumstances of their proposed transaction. Although the AML is relatively new to China compared with other jurisdictions, MOFCOM has shown that it is prepared to carry out a detailed analysis of the competition concerns raised by proposed cross-border concentrations, and to adopt remedies which it considers appropriate, rather than simply following the same approach of more established authorities in other jurisdictions. Therefore, parties to proposed transactions which may raise competition concerns in China should consider whether and when to propose additional restrictive conditions as part of the global strategy in accordance with the Provisions of Restrictive Conditions, in order to ensure the timely progress of their transaction.


1MOFCOM Anti-monopoly Bureau's Interpretation of Provisions of the Ministry of Commerce on Imposing Additional Restrictive Conditions on the Concentration of Business Operators (for Trial Implementation), dated 17 December 2014. See

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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

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

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
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please 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 (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

To Use 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.


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.


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