An amendment to the Anti-Monopoly Law (AML) of China came into force on the 1 August 2022. The Amendment sets out changes and improvements to the merger control filing regime together with the Regulations on the Examination of Concentration of Business Operators (Draft for Comment) (ECBO).
I. Threshold for Merger Control Filing
According to Article 25(3) of the AML, the first condition triggering a merger control filing is that an operator obtains control over other operators through contracts or other means, or can exert decisive influence over other operators.
The draft ECBO further elaborates on the elements of "exert decisive influence":
- Holding direct or indirect voting rights or similar interests in other business operators;
- Influence on the appointment and dismissal of other business operators;
- Influence on financial budget of other business operators;
- Influence on business situation of other business operators;
- Influence on other aspects of operation and management of other business operators.
Further, the threshold for declaration has been raised. An obligation to declare will now be triggered in China if:
- the individual turnover in China of at least two undertakings exceeds CNY 800 million (2021: approx. US$124 million) in the preceding financial year; and
- the combined turnover of all undertakings exceeds CNY 12 billion (2021: approx. US$1.86 billion) on a global basis and/or CNY 4 billion (2021: approx. US$620 million) within China.
The raising of the threshold will ease anti-monopoly compliance pressure for mergers of small and medium-sized enterprises, help facilitate investments and reduce transaction costs.
Of particular note with regards to killer acquisitions, when merging of business operators does not meet the reporting standards prescribed by the State Council, but there is evidence showing competition may be eliminated or restricted, the anti-monopoly law enforcement agency of the State Council may require the business operators to declare.
II. Gun-jumping
Business operators failing to declare business mergers where mandated will be subject to fines up to ten times higher under the new AML compared to the previous level.
III. Stop the Clock
Article 32 of the AML formally establishes a "Stop the Clock" system. In future, the AML enforcement agency may suspend the determination of merger thresholds where there is:
- Delayed or incomplete documentation submitted;
- Changed circumstances material to the merger; or
- Negotiation over pemedy proposals.
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.