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in Concentrations of Business Operators dated 5 July 2010 (hereinafter "the Regulations on Divestiture"), were repealed.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 Video
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.