MOFCOM has released two draft regulations for public comments, aimed at streamlining and clarifying its merger review process. The first is the Simple Mergers Regulation, which addresses the types of mergers which would be considered as raising little or no significant competition issues. The second is the Restrictive Conditions Regulation, which addresses structural, behavioural and hybrid remedies for concentrations.

Simple Mergers Regulation

The Simple Mergers Regulation is a first step towards the creation of a simplified procedure for cases that are not likely to raise competitive concerns. The transactions that will be regarded as "simple" are:

  • Mergers between competitors if the combined market share is below 15%
  • Mergers in which parties have a vertical relationship, and their combined market share in the relevant upstream and downstream markets is below 25%
  • Mergers in which parties have no horizontal or vertical relationship, and their combined market share in any market is below 25%
  • Creations of off-shore joint ventures or acquisitions of off-shore targets with no business in China
  • Reductions of the number of controlling shareholders of a joint venture.

These thresholds are similar to those used for simplified procedures in the EU. There are, however, significant exceptions that provide MOFCOM with the discretion to perform an in-depth review, for example when it is difficult to define the market or where a merger may harm Chinese national economic development. Also, it is not fully clear what benefits a simple merger will actually enjoy since the Regulation does not provide for e.g. a shorter or simplified notification form.

Restrictive Conditions Regulation

The Restrictive Conditions Regulation provides guidance for merging parties to propose remedies. MOFCOM's remedy procedures are similar to the remedy procedures in the EU and the US, although MOFCOM seems to maintain a broader discretion in assessing, modifying and enforcing remedies. The Regulation clarifies a number of important aspects in the remedies process, especially with respect to behavioural and hybrid remedies. Based on recent decisions, MOFCOM does not seem to have a general preference for structural remedies (unlike the EU and the US). The Regulation does not provide detailed guidance on the procedures and timeline with regard to implementation.

Regulation reference:    Regulations on Standards Employed for Simple Concentrations of Undertakings

Issuing authority:          Ministry of Commerce

Regulation reference:    Regulations on Imposing Restrictive Conditions on Concentrations of Undertakings

Issuing authority:          Ministry of Commerce

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