In 2008, China promulgated the first Anti-monopoly Law. Since then, the Ministry of Commerce (MOC) has issued guidelines and regulations covering substantive and procedural rules to clarify its approach in enforcing the law. MOC had also given 15 conditional approval and prohibition decisions by the end of July 2012.

Review Standard The Anti-monopoly Law (AML) is applicable to all concentrations, including foreign-to-foreign party transactions, which may eliminate or restrict competition in the Chinese market. A merger control filing with MOC is required, when in the financial year preceding the transaction, firstly, either the worldwide aggregate turnover of all parties involved exceeded Rmb10 billion ($1.6 billion) or the Chinese aggregate turnover of all parties involved exceeded Rmb2 billion ($314 million), and secondly each of at least two of the parties involved had turnover in China in excess of Rmb400 million ($62 million).

Review procedure  According to the AML, there are three phases to review a concentration, with clearance possible in any phase. In Phase I, the review period takes 30 days and begins with the official acceptance of the notification by MOC. During this period, the Ministry will conduct a preliminary review and decide whether the concentration merits an in-depth Phase II review. However, it has become normal practice that even unproblematic cases enter into Phase II. In Phase II, the review period is extended by 90 days. In cases that give rise to substantial competition concerns Phase II can be extended by another 60 days, which is commonly understood as Phase III.

After the initial notification submission, MOC will accept the filing only if it deems the accompanying documentation complete. The AML does not stipulate a time limit for this pre-acceptance review, thereby leaving it to the sole discretion of MOC whether and when to accept a filing. Moreover, MOC tends to request additional information from the parties at this stage. In particular, there are cases where parties were confronted with several rounds of such requests before their filing was accepted as complete. As the review timeline only begins with the official acceptance of the filing, some cases have already been delayed significantly at this stage.

Suspension and penalties The AML sets forth a mandatory filing obligation and a suspension obligation. The parties to a reportable transaction are prohibited to close the transaction before a clearance decision is obtained. An infringement of this obligation may result in penalties including fines, the suspension of the transaction or the restoration of the pre-closing status.

Conditional approval MOC has published four conditional approval decisions since January 2012. The decisions highlight the Ministry’s approach to reviews. Understanding these decisions can help parties which may be involved in the merger-control regime in future.

Fast-track reviews Due to its lengthy review procedures, MOC has been criticised for unnecessarily delaying transactions and increasing transaction costs and risks. To counter these concerns and to make its procedures more efficient, the Ministry has been considering proposals for singling-out unproblematic cases for a fast-track review.

So far, MOC has not officially published a draft of the regulation. However, sources reveal that an internal draft has been circulated according to which transactions will be classified in simple, normal and major cases based on criteria such as market share and the Herfindahl-Hirschman Index with different review timelines set for each type (see figure 1). According to this draft, a simple case should be completed in Phase I. However, the threshold to qualify for a simple case under the draft is set relatively high compared to the regimes in the US or the EU. The present draft also indicates that MOC would include industrial or political considerations to determine the type of a case. For example, a transaction will be deemed a major case if it involves the acquisition of well-known trademarks or time-honoured brands (granted by the Ministry of Commerce to enterprises whose brands have stood the test of time and are widely recognised) or if it concerns industries with restrictions for foreign investment.

Last but not the least, an amended filing form published by MOC took effect on July 7 2012. Even though MOC did not issue a form applicable to simple cases, the revised form provides welcome clarifications and streamlines the practice of the regulator. However, the amended form includes certain obligations that could further increase the burden and costs of the transaction parties, especially by requiring the submission of an extensive range of sensitive information.