Answer ... The primary legislative framework governing merger control in China is the Anti-monopoly Law (AML), which was initially enacted in August 2008 and subsequently amended in August 2022. Alongside the AML, the Chinese antitrust regulator has issued various implementation rules related to merger control. Among these, the Provisions on the Review of Concentration of Undertakings – which were initially introduced in 2009 and have been updated multiple times since then, most recently in March 2023 – are particularly important in governing merger control.

Answer ... The merger control stipulations delineated within the AML encompass all economic sectors without exception.

Answer ... In China, responsibility for overseeing merger control reviews falls under the jurisdiction of the State Administration for Market Regulation (SAMR). Specifically, the Anti-monopoly Law Enforcement Bureau II within SAMR is tasked with:

• conducting merger control reviews; and
• investigating and imposing penalties in cases involving premature merger implementation, which is commonly referred to as ‘gun-jumping’.

In August 2022, five provincial market regulation authorities – that is, those in Beijing, Shanghai, Chongqing, Guangdong and Shaanxi – were given the authority to handle simple merger cases that have a local connection. However, the ultimate decision-making authority for conducting merger control reviews remains with SAMR at the national level.

Answer ... The following types of transactions are subject to the merger control regime in China:

• combinations of undertakings;
• acquisition of control by one undertaking over another through the procurement of equity or assets; and
• acquisition of control or the power to exert decisive influence by one undertaking over another through contractual arrangements or other means.

Answer ... The Anti-monopoly Law and its related implementing regulations do not provide specific definitions of the terms ‘control’ or ‘power to exert a decisive influence’. In practice, these terms are commonly understood to mean the ability to block important business decisions within a company. This control can be achieved through:

• voting rights held at the shareholder level;
• representative at the board of directors; or
• contractual arrangement and other methods.

These important business decisions may include matters such as:

• financial budgets;
• business plans;
• significant investments; and
• the appointment or removal of top management.

In accordance with the Provisions on the Review of Concentrations of Undertakings, the assessment of whether an undertaking will obtain control or the power to exert a decisive influence over another undertaking necessitates a comprehensive evaluation of the following factors:

• the underlying purpose of the transaction and future strategic plans;
• the existing equity structure of the other undertaking and alterations thereto before and after the transaction;
• issues subject to voting at shareholders’ meetings within the other undertaking, encompassing:
• • the mechanisms governing voting;
  • historical participation rates; and
  • voting records;
• the composition and voting mechanism of decision-making or managerial bodies, such as the board of directors, within the other undertaking and voting records;
• information pertinent to the appointment and removal of senior management members within the other undertaking;
• relationships among shareholders or directors within the other undertaking, including the presence of proxy voting or coordinated actions;
• the existence of significant business affiliations or cooperative agreements between the undertaking and the other undertaking; and
• any additional factors deemed relevant for due consideration.

Answer ... Yes. If an acquisition of minority interests confers ‘control’ or the ‘power to exert a decisive influence’ over the target, the acquisition is covered by the merger control regime.

Answer ... Yes. The formation of a joint venture falls within the merger control regime when two or more shareholders could exercise control over the joint venture. Other factors – such as whether the joint venture is fully functional – are not taken into account when determining whether the transaction falls under the scope of the merger control regime.

Answer ... Yes. If a foreign-to-foreign transaction constitutes a concentration of undertakings and aligns with the prescribed filing thresholds, it will trigger a filing obligation in China.

Answer ... The current merger filing thresholds in China are as follows:

• The combined global turnover of all participating undertakings in the preceding fiscal year was at least RMB 10 billion and the individual Chinese turnover of at least two of the participating undertakings in the preceding fiscal year was at least RMB 400 million; or
• The combined Chinese turnover of all participating undertakings in the preceding fiscal year was at least RMB 4 billion and the individual Chinese turnover of at least two of the participating undertakings in the preceding fiscal year was at least RMB 400 million.

‘Turnover’ refers to revenue generated from selling goods and providing services, with deductions made for applicable turnover taxes and surcharges. Key guidelines for calculating turnover include the following:

• Typically, the State Administration for Market Regulation (SAMR) relies on the audited financial statements of a party for the fiscal year closest to the date when the transaction documents were executed.
• The turnover of each party involved in the merger is assessed at the group level, considering all revenues of direct or indirect affiliates but excluding sales within the same corporate group.
• To determine turnover generated from China, the location of the customers is used as a reference.
• For financial institutions such as banks, insurers, licensed security investment companies and licensed fund management companies, turnover should be multiplied by 10% when calculating the thresholds.
• Where one entity acquires a specific segment of another entity and the latter loses control over that segment, the turnover of the target should only include the revenue generated by that particular segment.

SAMR may launch an investigation into a transaction that falls short of meeting the specified thresholds if there are reasonable grounds to believe that the transaction has the potential to impede competition.

Answer ... Intra-group reorganisations may qualify for an exemption from the merger filing requirements if either of the following conditions is met:

• One of the participating undertakings possesses more than 50% of the voting shares or assets of each of the other entities involved; or
• More than 50% of the voting shares or assets of each participating undertaking are possessed by a separate undertaking that is not involved in the concentration.

Answer ... China implements a merger notification mechanism. The company must obtain approval from the State Administration for Market Regulation (SAMR) prior to closing if any transaction meets the applicable filing thresholds.

However, there is an exemption from the merger filing requirement for intra-group reorganisations, provided that:

• one of the participating entities holds more than 50% of the voting shares or assets of each of the other participating entities; or
• the same entity, which is not participating in the concentration, holds more than 50% of the voting shares or assets of each of the participating entities.

Answer ... SAMR provides a pre-filing consultation process that allows parties to ask questions about substantive or procedural issues before officially filing. To use this service, the party seeking consultation must reveal its identity and ask real and pertinent questions. Anonymous queries or hypothetical situations are not accepted through this process.

Answer ... The responsibility for notification falls upon the acquiring party in the context of an acquisition or upon the merging parties in the context of a merger. In situations where multiple parties share the responsibility for notification, they have the option to collectively submit a joint notification.

Answer ... There is no filing fee for merger filing in China.

Answer ... The following particulars are to be included in the submission:

• administrative information pertaining to the involved undertakings, encompassing details regarding their business, ultimate controller and corporate history;

• a concise depiction of the transaction based on the pertinent transactional documents;
• a definition of the relevant market(s) based on the business relationship between the parties;
• a detailed analysis of the transaction’s impact on the relevant markets based on comprehensive market data for each relevant market; and
• the signed transactional documents.

Furthermore, the foreign notifying party must submit a notarised and legalised certificate of incorporation.

Where a document is drafted in a foreign language, a Chinese translation or summary thereof must also be submitted.

Under the normal procedure, some additional information and documents will be required. This will typically involve the provision of:

• copies of the business licence of relevant affiliates;
• details about the main suppliers and customers in each relevant market;
• an analysis of market entry; and
• an explanation of any potential benefits or efficiencies resulting from the transaction.

Answer ... The notification must be submitted prior to the completion of the transaction. In practice, it is customary to file the notification promptly following the execution of the transaction document.

Answer ... In a strict sense, the submission of notification is permitted only after execution of the definitive transaction documents. Although there is an option for parties to initiate the notification process before signing a definitive agreement, SAMR will not begin reviewing or accepting the notification until the parties have formally executed the transaction documents.

However, in exceptional circumstances where a concentration arises through a public tender offer or a hostile takeover of a publicly traded company, SAMR allows the acquiring party to utilise the offer as the basis for the notification, instead of requiring a fully executed acquisition agreement. Nevertheless, the primary challenge in such transactions has always been how to meet the deadline for a public takeover while SAMR maintains its own pace for case review. Therefore, it is advisable to engage in a pre-filing consultation with SAMR to:

• seek its acknowledgment of the transaction’s urgency; and
• communicate any pertinent competition-related concerns, should they arise.

Answer ... Yes. When a transaction triggers the merger filing obligation in China, the transaction may not be closed before obtaining the requisite approval from SAMR.

Answer ... There is a distinction between public announcements in simple cases and normal cases. In simple cases, a mandatory public announcement happens after the case is accepted. This announcement is meant to gather feedback from the public. It typically includes a brief description of:

• the involved parties;
• their businesses;
• the transaction;
• the relevant markets; and
• the parties’ market shares presented in a range (eg, 5%-10% or 10%-15%).

However, in normal cases, there is no such public announcement. Instead, SAMR may engage in discussions with:

• relevant government agencies;
• industry associations; and
• other stakeholders.

As per the Provisions on the Review of Concentrations of Undertakings, SAMR and any other organisations and individuals involved are legally obliged to maintain the confidentiality of trade secrets, undisclosed information and confidential business data that they come across during the review process. To ensure this confidentiality, the notifying parties must provide both confidential and non-confidential versions of the notification. SAMR will only disclose information from the non-confidential version when making public announcements or engaging in consultations with stakeholders.

Answer ... The State Administration for Market Regulation’s (SAMR) review process can be divided into two main phases:

• the pre-docketing review; and
• the post-docketing review.

Pre-docketing review: Upon receiving the initial notification package, SAMR starts a pre-docketing review to check whether all the necessary information and documents are provided. If they find any important information missing, they will request additional information from the notifying parties. The parties are then expected to respond to these requests within a specified period – usually one or two weeks. Multiple rounds of supplementary submissions might be needed before SAMR officially accepts the case. Once the parties have provided comprehensive responses to all the requests, SAMR issues a case docketing notice, marking the start of the post-docketing review, which is explained below.

The timeframe for the pre-docketing review is not specifically defined by law and can vary significantly, ranging from several weeks to several months. This variation depends on factors such as:

• the complexity of the case; and
• the completeness of the materials submitted.

Post-docketing review: The post-docketing review consists of three stages:

• Phase I (up to 30 days);
• Phase II (up to 90 days); and
• Phase III (up to 60 days).

The application of these stages in a specific case depends on whether the notification is submitted under the simplified procedure or the normal procedure.

Simplified procedure: SAMR introduced the simplified procedure in 2014 to expedite eligible notifications. It applies to transactions that meet the following criteria:

• horizontal mergers where the combined market share of all parties is less than 15% or in vertical mergers, if each party’s market share in both the upstream and downstream markets is less than 25%. For mergers without horizontal or vertical overlaps among the parties, none of the parties should hold a market share of 25% or more within any relevant market;
• the formation of offshore joint ventures that will not operate within China or the acquisition of offshore targets not engaged in business activities within China; and
• the acquisition of a controlling stake in a joint venture by an existing controlling shareholder.

In these cases, parties can request the application of the simplified procedure in their initial notification. During the pre-docketing review, SAMR assesses whether the notification meets the criteria. If it does, SAMR makes a public announcement about the case for 10 days after the case is docketed. During this period, anyone can submit objections or comments regarding the case to SAMR. If no objections are raised, SAMR is likely to clear the case within a few days, typically during Phase I. If an objection with valid arguments is raised, SAMR engages with the parties to address the concerns, possibly transitioning the case into Phase II. If SAMR finds that the notification does not meet the criteria for the simplified procedure, it will withdraw the case docket and ask the parties to make a new filing under the normal procedure.

Normal procedure: Under the normal procedure, SAMR not only conducts its own analysis but also actively seeks input from various stakeholders, including government agencies, industry associations, competitors, customers and suppliers. Cases with no significant competition concerns under the normal procedure typically receive clearance during the later part of Phase II, usually within two to three months of the case being docketed. However, if substantial competition concerns arise, the review process can be extended and may even progress to Phase III.

Answer ... To speed up the approval process, it is crucial for the parties involved to work closely with SAMR by providing all the necessary, accurate and thorough information as required by SAMR. If needed, the parties can also request a meeting with SAMR to address any concerns or questions.

The updated Anti-monopoly Law (AML) includes a ‘stop-the-clock’ mechanism, which allows SAMR to temporarily pause the review period during the post-docketing review in specific situations. These situations include when the requested information has not been provided or when negotiations are ongoing to develop a mitigation plan.

Answer ... Yes. Please refer to question 4.1.

Answer ... In certain high-profile cases, SAMR may find it necessary to communicate with its counterparts in other jurisdictions. In these instances, SAMR may ask the parties involved to provide a waiver that permits SAMR to share and receive information from its international counterparts.

Answer ... SAMR has broad information-gathering powers to collect notification-related information. SAMR has the power to request information from:

• the notifying parties;
• industry associations;
• competitors;
• suppliers;
• customers; and
• other stakeholders.

According to the AML, companies and individuals that provide false or misleading information or take actions to hinder a review process may be imposed with a monetary penalty. The penalty is capped at 1% of a company’s sales revenue from the prior year or RMB 5 million if the company had no sales revenue during that period. For individuals, the maximum penalty is RMB 500,000. In cases where the misconduct rises to the level of a criminal offence, legal action may also be taken in accordance with relevant laws.

Answer ... Third parties are not granted a statutory entitlement to access merger control files. However, they do have the opportunity to challenge transactions during the review process.

During its review process, SAMR may seek input from external parties – including government agencies, industry associations, competitors, suppliers, customers and other stakeholders – regarding the proposed acquisition. These third parties have the opportunity to share their perspectives during these consultations.

In cases under the simplified procedure, once a simplified notification is officially accepted, SAMR will post a public announcement about it on its official website for a period of 10 days. During this announcement period, any third party is welcome to submit objections or comments to SAMR regarding the transaction in question.

Answer ... No, there are no explicit provisions in the AML or its associated regulations that authorise the parties to execute a local carveout for a cross-border transaction to avoid delaying closing while the review is ongoing.

Answer ... The factors that SAMR may consider when evaluating the competitive implications of a transaction include:

• the market share and control power of the participating undertakings in the relevant markets;
• the concentration level within the relevant markets;
• the impact of the transaction on market entry and technological progress;
• the effects of the transaction on consumers and other relevant businesses;
• the influence of the transaction on national economic development; and
• other factors affecting market competition that should be taken into account.

When evaluating the control power of the participating undertakings, factors to consider include:

• market share;
• the degree of substitutability of products or services;
• control over sales or raw material procurement;
• financial resources and technological capabilities;
• data-handling capabilities;
• market structure;
• the production capacity of other businesses;
• the purchasing power of downstream customers; and
• the potential entry of new competitors.

To assess the level of market concentration, factors such as the number of businesses in the relevant market and their market shares can be considered.

When evaluating the impact of the transaction on market entry, SAMR:

• considers how businesses may influence market entry through control over:
• • production inputs;
  • sales and distribution channels;
  • critical technologies;
  • key facilities; and
  • data; and
• assesses the likelihood, timeliness and sufficiency of market entry.

Assessing the impact of the transaction on technological progress involves considering:

• its effect on technological innovation incentives and capabilities, research and development investment and utilisation; and
• the integration of technological resources.

To evaluate the impact of the transaction on consumers, SAMR considers its influence on factors such as the quantity, price, quality and diversity of products or services available to consumers.

SAMR assesses the impact of the transaction on other relevant businesses by examining how it affects market entry, transaction opportunities and competitive conditions for businesses operating in:

• the same relevant market; and
• upstream or downstream markets.

To assess the impact of the transaction on national economic development, SAMR considers how it affects economic efficiency, business scale and the development of relevant industries.

Additionally, in assessing the competitive impact of the transaction, SAMR also considers:

• its effects on the public interest;
• whether any participating undertaking is a financially distressed enterprise; and
• other relevant factors.

Answer ... No. There is no different substantive test applying to joint ventures.

Answer ... SAMR considers the following theories of harm when reviewing a transaction to assess its potential impact on competition:

• Horizontal effects: SAMR evaluates how the transaction might affect competition between firms that operate at the same level of the supply chain or within the same market. This includes assessing whether the merger or acquisition would lead to a significant reduction in the number of competitors in a specific market, potentially resulting in higher prices or reduced choices for consumers.
• Vertical effects: SAMR examines how the transaction might impact competition between firms that operate at different levels of the supply chain. Vertical effects can involve issues such as whether the merged entity would have the ability and incentive to engage in anti-competitive practices, such as foreclosure or discrimination against rivals in either the upstream or downstream markets.
• Conglomerate effects: SAMR also considers whether the transaction would lead to conglomerate effects, where the merged entity would have the ability and incentive to leverage its position in one market to gain an advantage in another market. For example, if a company with a dominant position in one market acquires a company in a different market, it may use its dominance to harm competition in the second market.
• Unilateral effects: SAMR assesses whether the transaction could result in unilateral anti-competitive effects, where the merged entity alone has the power to harm competition in the market. This could involve situations where the merged entity would have significant market power and the ability to increase prices or reduce output without coordination with other competitors.
• Coordinated effects: SAMR also examines whether the transaction could lead to coordinated anti-competitive effects, where firms in the market could collectively reduce competition through tacit or explicit collusion. This involves evaluating whether the transaction would make coordination among competitors easier or more likely.

SAMR also takes into account national economic development and public interest during the merger review process. This underscores the comprehensive evaluation conducted by SAMR, where not only competition issues but also non-competition issues are considered.

Answer ... Yes. Where the State Administration for Market Regulation (SAMR) identifies competition concerns during its review, the parties involved in the transaction have the opportunity to engage in negotiations with SAMR to propose remedies. These remedies are intended to address the identified competition issues and ensure that the transaction can proceed without harming competition in the relevant markets. Remedies can be broadly categorised into two types: behavioural remedies and structural remedies.

Behavioural remedies: Behavioural remedies involve specific actions that the merging parties agree to take to address competition concerns without altering the market structure. Some examples of behavioural remedies include the following:

• Price controls: The merging parties may agree to limit price increases or maintain certain price levels for a specified period.
• Non-discrimination commitments: The merged entity may commit to treating all customers or suppliers fairly and without discrimination.
• Access and licensing agreements: The parties may grant competitors access to essential facilities or intellectual property on reasonable terms.
• Firewalls: Measures may be implemented to prevent the sharing of sensitive information between different parts of the merged entity that could lead to anti-competitive behaviour.

Structural remedies: Structural remedies involve changes to the market structure, such as divestitures or asset sales, to address competition concerns. Common structural remedies include the following:

• Divestitures: The merging parties may be required to sell off a portion of their assets or business operations to a third party to create a new, independent competitor.
• Market exits: In some cases, the merged entity may be required to exit specific markets or discontinue certain product lines to eliminate the competition concern.
• Licensing: The merged entity may be required to license its technology or intellectual property to other firms to facilitate competition.
• Minority ownership: The parties may agree to limit their ownership stake in a competitor to prevent undue influence.

Answer ... If SAMR is concerned that a transaction may have anti-competitive effects or the potential for such effects, it communicates this to the parties making the notification. Subsequently, the notifying parties have the opportunity to suggest remedies to address SAMR’s concerns. SAMR:

• evaluates these proposed remedies, taking into account their effectiveness, feasibility and timeliness; and
• informs the notifying parties of its assessment.

If SAMR determines that the proposed remedy plan is insufficient to alleviate the competition concerns associated with the transaction, it enters into negotiations with the parties. Typically, this process involves multiple rounds of written or oral discussions, with the goal of crafting measures that effectively address competition concerns while permitting the transaction to proceed.

The timing for proposing remedies is a case-specific matter. If a transaction is anticipated to raise competition concerns, the parties can engage in discussions with SAMR regarding potential issues and proposed remedies before SAMR formally expresses its concerns. Given that remedy negotiations with SAMR can be time consuming, it is advisable for the parties to prepare a remedy proposal and commence negotiations with SAMR promptly. In cases where multiple jurisdictions may impose remedies, it is crucial to coordinate the content and approval processes for remedy plans across various jurisdictions.

Answer ... In foreign-to-foreign transactions where SAMR has identified concerns that the deal may harm market competition in China, SAMR has been open to imposing behavioural and/or structural remedies.

Answer ... The parties can appeal the State Administration for Market Regulation’s (SAMR) final decision. The reviewing court or tribunal will conduct a full review of all facts and evidence. Pursuant to Article 65 of the Anti-monopoly Law, the parties must initially file their appeal with the reviewing tribunal within SAMR. If they are still unsatisfied with SAMR’s appeal decision, they have the option to pursue further appeal with the appropriate court. That said, in practice, it is rare for the parties to appeal the SAMR’s final decision in the merger control process.

Answer ... According to Article 25 of the Administrative Litigation Law, third parties that are affected by or have a stake in SAMR’s decision have the legal right to initiate a lawsuit related to such decision. That said, in practice, it is rare for any third parties to appeal the SAMR’s final decision in the merger control process.

Answer ... Sanctions for failure to notify can vary depending on the impact of the concentration:

• If it is determined that the concentration leads to a reduction or restriction of competition, the State Administration for Market Regulation can order the parties involved to:
• • stop the concentration;
  • divest relevant equity or assets;
  • transfer business operations within a specified timeframe; and
  • take any other necessary actions to revert to the pre-transaction state.
• Additionally, a fine of up to 10% of the previous year’s sales may be imposed.
• If the concentration is found to have no adverse impact on competition, the competition authority has the authority to levy a fine of up to RMB 5 million.

Since the enactment of the Anti-monopoly Law, there have been over 200 publicly disclosed cases of failure to notify.

Answer ... The same sanctions described in question 7.1 apply.

Answer ... SAMR has the authority to monitor whether an obligor is complying with the conditions of approval and sanctions. This monitoring can be carried out directly by SAMR or by appointing a monitoring trustee or a divestiture trustee.

If SAMR determines that a monitoring trustee is necessary, the obligor must provide SAMR with a list of potential monitoring trustees within 15 days of SAMR’s review decision. Similarly, if the restrictive conditions involve divestiture, the obligor should submit potential divestiture trustee candidates to SAMR at least 30 days before entering the entrusted divestiture phase. Usually, SAMR selects the trustee from the candidates proposed by the obligor. However, SAMR can guide the obligor in selecting a qualified trustee if the obligor:

• fails to submit trustee candidates within the given timeframe; and
• continues to neglect this requirement even after a second written notice.

Once a trustee has been chosen, the obligor is responsible for formalising the relationship through a written agreement that outlines their respective rights and responsibilities. This agreement must receive approval from SAMR. The trustee is expected to carry out its duties diligently and with due care. The obligor is also obligated to compensate the trustee and provide the necessary support and resources.

Failure to comply with the conditions of approval can result in the same sanctions described in question 7.1 being imposed.

Answer ... Key points of the merger control landscape and prevailing trends in China include the following:

• Increased regulatory scrutiny: Chinese authorities – primarily the State Administration for Market Regulation (SAMR) – have been actively enforcing merger control regulations. They have become more vigilant in reviewing and regulating mergers and acquisitions, particularly those involving large or high-profile deals.
• National security reviews: In addition to antitrust considerations, China has implemented a national security review process for mergers and acquisitions, especially those involving foreign investors or sensitive industries. This dual review process, which includes both antitrust and national security reviews, can add complexity to cross-border transactions.
• Extraterritorial reach: Chinese authorities have expanded their extraterritorial reach, meaning that they scrutinise not only domestic transactions but also deals involving foreign companies with significant activities or assets in China. This approach aligns with the global trend of increased extraterritorial enforcement of antitrust laws.
• Tech and data-related scrutiny: Given China’s growing importance in the technology sector, mergers and acquisitions involving tech companies, especially those handling large amounts of data, have faced heightened scrutiny. SAMR has been concerned about the potential impact on data privacy and competition.
• Penalties and conditions: SAMR has been active in imposing penalties for non-compliance with merger control regulations. It has also been attaching conditions to approvals, such as requiring divestitures or behavioural remedies to address competition concerns.
• Cooperation with international authorities: Chinese antitrust authorities have increased their cooperation with international counterparts, including the US Federal Trade Commission (FTC) and the European Commission, on cross-border merger reviews. This reflects the global nature of many transactions.
• Changes in filing thresholds: Chinese authorities are in discussions about the possibility of modifying the filing thresholds for merger control. They put forth a draft proposal for public input in June 2022 which includes suggested changes to these filing thresholds. The precise date on which these revised thresholds will be implemented and whether further adjustments will be made remains unclear. The proposed amended filing thresholds outlined in the draft proposal are as follows:
• • The combined global turnover of all participating undertakings in the preceding fiscal year is at least RMB 12 billion and the individual Chinese turnover of at least two of the participating undertakings in the preceding fiscal year is at least RMB 800 million;
  • The combined Chinese turnover of all participating undertakings in the preceding fiscal year is at least RMB 4 billion and the individual Chinese turnover of at least two of the participating undertakings in the preceding fiscal year is at least RMB 800 million; or
  • The Chinese turnover of one of the participating undertakings in the preceding fiscal year is at least RMB 100 billion, and the market value (or valuation) of any other merged entities or acquired entities is at least RMB 800 million and its Chinese turnover in the preceding fiscal year accounts for one-third of its global turnover.

Answer ... Achieving a smooth merger clearance process in China can be challenging, but careful planning and adherence to key strategies can help to mitigate potential issues.

Top tips: Our top tips for smooth merger clearance in China are as follows:

• Early assessment and strategy development: Begin the assessment process early. Evaluate the merger’s potential impact on competition and regulatory requirements. Develop a comprehensive strategy that considers both antitrust and national security concerns.
• Engage legal counsel: Hire experienced legal counsel with expertise in Chinese antitrust law and merger control. Legal experts can provide guidance, navigate regulatory nuances and assist in crafting a robust compliance strategy.
• Know the filing thresholds: Stay informed about the thresholds that trigger mandatory merger filings in China. Ensure that your transaction meets these criteria and be prepared to file accordingly.
• Engage early with the State Administration for Market Regulation (SAMR): Establish a positive and cooperative relationship with SAMR. Early engagement with SAMR can help to facilitate communication and address any concerns it may have.
• Synchronise global filings: If your merger involves multiple jurisdictions, coordinate and align your merger control filings across all relevant jurisdictions. Timely and transparent communication with SAMR regarding the progress in other countries can be beneficial.
• Address China-specific concerns: Be aware of China’s specific regulatory focus, especially in strategic sectors such as technology, healthcare and agriculture. Be prepared to address any unique concerns that the Chinese authorities may have.
• Transparency and compliance: Provide accurate and complete information in your merger notification. Transparency and compliance with regulatory requests are critical for a smoother clearance process.
• Consider remedies: Anticipate potential competition concerns and consider offering appropriate remedies, such as divestitures or behavioural commitments, to address these concerns and expedite approval.

Traps: Potential sticking points include the following:

• National security reviews: In addition to antitrust concerns, transactions involving foreign investors or sensitive industries may trigger national security reviews. These reviews can add complexity and potentially delay the clearance process.
• Third-party objections: Even under the simplified procedure, third parties can object to a merger, leading to a more in-depth review process. Be prepared for the possibility of objections and have a strategy in place to address them.
• Complexity of high-profile cases: High-profile mergers or those involving cutting-edge technology can attract increased scrutiny and raise more complex regulatory issues. These cases may require additional time and resources for clearance.
• China-specific requirements: Chinese authorities may impose unique conditions or remedies that are specific to China’s interests. Understanding and addressing these requirements is crucial.
• Communication challenges: Language and cultural differences can sometimes pose communication challenges. Ensuring effective communication with SAMR and other relevant authorities is essential.
• Enforcement actions: Failure to comply with merger control regulations can result in penalties and potentially disrupt the transaction. Stay compliant and address any issues promptly.
• Timing uncertainty: The timing for merger clearance in China can vary and is not always predictable. Delays can occur, so it is essential to plan for potential setbacks.

Overall, a proactive approach, early engagement with regulatory authorities and a thorough understanding of both antitrust and national security considerations can help in navigating the complexities of the merger clearance process in China. Consulting with legal experts familiar with the Chinese regulatory landscape is often advisable to ensure a smoother path to approval.