China: Merger Control 2019

Last Updated: 28 February 2019
Article by DeHeng Law Offices
Most Read Contributor in China, July 2019

1 Relevant Authorities and Legislation

1.1 Who is/are the relevant merger authority(ies)?

In early 2018, the Price Supervision and Antimonopoly Bureau of the National Development and Reform Commission ("NDRC"), the Anti-Monopoly Bureau of the Ministry of Commerce ("MOFCOM"), and the Antimonopoly and Anti-unfair Competition Bureau of the State Administration of Industry and Commerce ("SAIC") are integrated into the Anti-Monopoly Bureau ("AMB") within the State Administration for Market Regulation ("SAMR").The newly established AMB of SAMR is in charge of regulating and enforcing the merger control regime in China.

Currently, the AMB has 10 divisions. Seven divisions are tasked with antitrust enforcement; three of the seven oversee merger review: review division I; review division II; and review division III; The three other divisions investigate antitrust violations including monopoly agreements, abuse of dominance and administration monopoly. A separate Supervision and Enforcement Division looks at gun-jumping violations.

Besides the seven antitrust enforcement divisions, there are three administrative divisions at the AMB: the General Office; the Competition Policy and International Cooperation Division; and the Antimonopoly Committee Coordination Division.

The three review divisions have about 16 officials; five to six officials in each division. The final decisions are made at the SAMR level. In the normal procedures, SAMR usually solicits opinions from relevant government agencies for certain industries concerned in the notification and the government agencies' opinions will be

considered by SAMR.

China begins setting up provincial-level Administration for Market Regulation (AMR). Monopoly agreements, abuse of dominance and administration monopoly investigations may be carried out at the local level. However, the merger review will only be conducted at the state level in SAMR.

1.2 What is the merger legislation?

China's merger control regime is governed by the Anti-Monopoly Law ("AML"). Chapter 4 of the AML concerns "concentrations of undertakings". SAMR is now in charge of regulating and enforcing the merger control regime in China.

Since the AML was enacted in August 2008, a number of regulations and guidelines relating to the merger control regime have been promulgated. On 29 September, 2018, SAMR issued six guidelines:

  • Guiding Opinions on the Notification of the Concentration of Undertakings (关于经营者集中申报的指导意见).
  • Guiding Opinions on Documents and Materials Required for the Notification of Concentration of Undertakings (关于经营者集中申报文件资料的指导意见).
  • Working Guidance for Anti-Monopoly Review on Concentration of Undertakings (经营者集中反垄断审查办事指南).
  • Explanation on the Implementation of the Notification Form for Anti-Monopoly Review of Concentration of Undertakings(关于施行《经营者集中反垄断审查申报表》的说明).
  • Guiding Opinions on the Notification of Concentration of Undertakings Subject to Simplified Procedure (关于经营者集中简易案件申报的指导意见).
  • Guiding Opinions on Regulating the Titles of Cases on the Notification of Concentrations of Undertakings (关于规范经营者集中案件申报名称的指导意见).

These new guidelines replaced the guidelines issued by MOFCOM  and provide SAMR sufficient ground to conduct merger review under its own regulations.

1.3 Is there any other relevant legislation for foreign mergers?

Yes. There are separate review procedures required for foreign mergers in certain sectors, namely the foreign investment review ("FIR") and the national security review ("NSR").

FIR

Since 2016, China has been in the process of revising and simplifying its review procedures for foreign investment in China. The review procedure has been changed from a strictly case-by-case approval approach to a general record-filing system, except for those foreign investments falling into the China nationwide "negative list".

On 28 July, 2017, an updated version of China's Catalogue of Industries for Guiding Foreign Investment ("2017 Catalogue") went into effect. The 2017 Catalogue, for the first time, explicitly refers to the restricted (35 line items) and prohibited (28 line items) industries, plus the special encouraged industries with restrictions on management and/or shareholding ratios, collectively, as a negative list. For industries in the negative list, an approval is still needed for the foreign investment in China. For industries outside the negative list, only a filing for record is needed. The record-filing is a notifying record to China's commerce departments and it is not a pre-condition for other procedures needed by the foreign invested entities.

On 30 July, 2017, MOFCOM further released the Interim Administrative Measures on Filing of Incorporation and Change of Foreign-invested Enterprises (2017 revised version, "Interim Measures"). For foreign mergers in China, the Interim Measures explicitly specify that merger and acquisition of non-foreign investment enterprises in China by foreign investors and strategic investments of listed companies which do not involve special administrative measures (i.e. foreign investments under the negative list) shall be subject to the record-filing administration.

For such record filings, no filing fee is needed. There is no specific timeframe for obtaining the FIR clearance. Mergers falling within the scope of industries in the negative list that fail to file the FIR cannot be cleared in China.

NSR

Foreign investors acquiring Chinese domestic companies could file for a voluntary NSR before closing if:

  • the domestic target business is involved in a business that concerns national defence security; or
  • the domestic target business is involved in a business that concerns national economic security, and the foreign acquiring business intends to acquire de facto control of the target domestic business.

No filing fee is needed for a NSR either. There is no sanction for failing to file the NSR. However, the un-notified merger may face uncertainty, since the authority could initiate a NSR at its discretion or according to third parties' complaints. The authority in charge may prohibit the merger if it determines that the merger would severely harm national security.

There are two phases of review in relation to the NSR procedure: a "General Review" phase; and a "Special Review" phase (if required):

  • General Review. This phase takes a maximum of 30 working days from the date on which the Joint Committee receives MOFCOM's application (the parties involved in the transaction are required to first submit an application to MOFCOM). During this period, the Joint Committee will determine if the proposed deal is clear of national security concerns or whether more time is required to evaluate the proposed deal. During this phase, the Joint Committee will also solicit opinions from other relevant government departments. The determination as to whether the proposed deal is clear of national security concerns or whether more time is required to evaluate the proposed deal will be determined by the number of government departments invited to join this process – all determinations will be adopted on a unanimous basis.
  • Special Review. This phase takes a maximum of 60 working days. During this period, the Joint Committee will evaluate the deal in more details. The Joint Committee will decide during this phase whether the proposed deal is free of national security concerns or whether there are national security concerns, which will then lead to the proposed deal being prohibited.

1.4 Is there any other relevant legislation for mergers in particular sectors?

Yes. In China, many sectors require government approvals from different authorities, such as publishing, automobiles manufacturing, railways, banks, insurance and airfreight.

2 Transactions Caught by Merger Control Legislation

2.1 Which types of transaction are caught – in particular, what constitutes a "merger" and how is the concept of "control" defined?

In China, transactions which amount to a "concentration" will be caught if the notification thresholds are met.

A concentration is defined as: (a) a merger of undertakings; (b)  an acquisition of a controlling stake in other undertakings by an undertaking through acquisition of equity or assets; and (c) an acquisition of the controlling stake in other undertakings by way of concluding contracts or exercising decisive influences.

According to the Guiding Opinions of the Notification of Concentration of Undertakings released by SAMR, the concept of "control" in a concentration includes "sole control" and "joint controls" . The following factors will be taken into consideration by SAMR when determining whether an undertaking acquires control over another:

  • the purpose of the transaction and its future plans;
  • the equity structure of the other undertakings before and after the transactions;
  • the voting matters and voting mechanism of the general shareholders meeting of the other undertakings, the historical attendance, and the voting record;
  • the composition of the board of directors or the board of supervisors of the other undertakings and the voting mechanism;
  • the appointment and dismissal of senior executives of the other undertakings;
  • the relationship among the shareholders and the board directors of the other undertakings, whether there are situations such as the presence of any person acting in concert; and
  • the existence of major business relationships and cooperation agreements between the undertakings and the other operators.

2.2 Can the acquisition of a minority shareholding amount to a "merger" ?

Yes. There are no provisions under the AML or in its related rules that address the acquisition of minority ownership interests. However, acquisition of minority interests may also give rise to a notifiable transaction, depending on whether such acquisition may confer 'control' of the target company on the acquirer. As described in the response to question 2.1, if based on the acquiring party's right to appoint directors or senior management, the veto rights against major business decisions, or the control over key resources, the acquisition of a minority shareholding can also amount to obtaining a control over the target, and SAMR can then decide that a notifiable merger exists.

2.3 Are joint ventures subject to merger control?

According to the Guiding Opinions of the Notification of Concentration of Undertakings released by SAMR, the establishment of a joint venture is subject to merger control review if more than two operators are determined as having joint control over the joint venture, and meanwhile the notification thresholds are met. Other factors will not be considered in determining whether the joint venture is notifiable or not, such as whether the joint venture is a newly established company, or whether the joint venture has a market presence, etc.

Pure contractual arrangements without the creation of a new legal entity may not be notifiable.

2.4 What are the jurisdictional thresholds for application of merger control?

China adopts only the following turnover thresholds:

  • during the previous fiscal year, the total global turnover of all the undertakings participating in the transaction exceeds RMB 10 billion, and at least two of these undertakings each had a turnover of more than RMB 400 million within China; or
  • during the previous fiscal year, the total turnover within China of all the undertakings participating in the

concentration exceeded RMB 2 billion, and at least two of these undertakings each had a turnover of more than RMB 400 million within China.

2.5 Does merger control apply in the absence of a substantive overlap?

Yes, it does. For example, in the absence of a substantive overlap or a vertical relationship SAMR will examine the target company's business in China.

2.6 In what circumstances is it likely that transactions between parties outside your jurisdiction ( "foreign1 to-foreign" transactions) would be caught by your merger control legislation?

There are no express provisions within the AML or in its accompanying regulations which provide for special rules in respect of "foreign-to-foreign" transactions. The only reason to trigger a China merger notification is the turnover thresholds (please see the answer to question 2.4) and the concentration test (please see the

answer to question 2.1).

2.7 Please describe any mechanisms whereby the operation of the jurisdictional thresholds may be overridden by other provisions.

According to Article 4 of the Provisions of the State Council on Notification Thresholds of Concentrations of Undertakings (3 August, 2008) ("Thresholds Provisions"), if a merger does not trigger the turnover thresholds, but it is reflected by facts and evidence that the merger may eliminate or restrict competition, SAMR could initiate an investigation according to law (at its own discretion).

2.8 Where a merger takes place in stages, what principles are applied in order to identify whether the various stages constitute a single transaction or a series of transactions?

Article 7(2) of the Rules on Notification of Concentration of Undertakings provides that any concentration implemented between identical undertakings within two years that does not yet reach the notification thresholds provided under Article 3 of the Thresholds Provisions shall be regarded as one single transaction and the filing timing shall be the time when the notification threshold is triggered. The purpose for such regulation is to prevent the operators from circumventing the notification obligation by splitting one merger

into several sections.

Besides, Article 7(2) also stipulates that where an undertaking conducts the above-mentioned behaviour with other equivalent undertakings over which it has control, they are subject to the said provision.

The expression "equivalent undertakings" not only means the undertakings themselves. The subsidiary(s), indirect subsidiary(s), shareholder(s) and other affiliates of the undertakings concerned will also be deemed to be the "equivalent undertakings".

"Within two years" refers to the period between the day on which the first concentration deal is completed and the day on which the agreement of the last deal is executed.

The operators' turnover shall be the aggregated turnover of the several deals concerned.

3 NOTIFICATION AND ITS IMPACT ON THE TRANSACTION TIMETABLE

3.1 Where the jurisdictional thresholds are met, is notification compulsory and is there a deadline for notification?

The merger control notification in China is compulsory, and such notification shall be made before the execution of the proposed transaction. Otherwise, the parties involved in the proposed transaction are subject to "failure to file" sanctions under China's AML.

3.2 Please describe any exceptions where, even though the jurisdictional thresholds are met, clearance is not required.

No such exception exists.

3.3 Where a merger technically requires notification and clearance, what are the risks of not filing? Are there any formal sanctions?

Pursuant to Article 48 of the AML, if the undertakings fail to seek clearance in relation to a notifiable concentration, they could face the following sanctions:

  • an order to cease implementing the concentration;
  • an order to dispose of stocks or assets within a stipulated period, transfer the business within a stipulated period and/or adopt other necessary measures to restore the status before the concentration occurs; and
  • an order to pay a fine of no more than RMB 500,000.

Specifically, MOFCOM published the Provisional Measures for Investigating and Handling Failure to Legally Notify the Concentration of Undertakings. The provisional measure was effective on 1 February, 2012, which stipulates the rules mainly on the procedures for the investigation and handling of this circumstance.

Since 2014, MOFCOM and SAMR has published 22 cases of failure to notify the concentration of undertakings. Among these cases, the fines range from RMB 150,000 to RMB 400,000. The enterprises that have been fined include Chinese companies and foreign companies; for Chinese companies, there are both private enterprises and state owned enterprises. So far, MOFCOM or SAMR has not requested unwinding any concentration.

3.4 Is it possible to carve out local completion of a merger to avoid delaying global completion?

No. There are no express provisions within the AML or in its accompanying regulations which provide for exceptions that allow parties to close or implement a concentration prior to approval.

3.5 At what stage in the transaction timetable can the notification be filed?

The notification can only be filed after the execution of the transaction agreement and before the closing of the transaction. For the acquisition of a listed company in the form of public offer, the announced report on the acquisition by offer can be regarded as a signed transaction agreement.

Under very exceptional circumstances, SAMR would also accept the filing without the executed definitive agreement. In order to ask SAMR to waive the requirement of the executed definitive agreement, sufficient evidence needs to be submitted to prove that the executed transaction agreements cannot be submitted due to mandatory legal requirements of China or other jurisdictions or any other legitimate reasons. In such a situation, the notification could be filed with the relevant memorandums, framework agreements, draft agreements or tender offers, accompanied by the main terms and conditions of the transaction at the submission, instead of the executed definitive agreement.

3.6 What is the timeframe for scrutiny of the merger by the merger authority? What are the main stages in the regulatory process? Can the timeframe be suspended by the authority?

The following are the phases of review in relation to an antitrust merger control filing:

Phase 1 of review takes a maximum of 30 calendar days (from the date on which SAMR informs applicant(s) in writing that the filing is formally accepted).

Phase 2 of review takes a maximum of 90 calendar days. SAMR  will inform applicant(s) in writing if the review period is extended from Phase 1 to Phase 2.

SAMR has discretion to move the filing into a further extended phase of review for a maximum of 60 calendar days, provided that:

  • the applicant(s) agrees to extend the time limit for the review;
  • the documents submitted by the applicant(s) are inaccurate and require further verification; or
  • the circumstances surrounding the transaction have changed significantly after notification by the applicant(s).

If SAMR fails to make a determination at the expiry of each set period of time as stated above, parties may execute the transaction.

3.7 Is there any prohibition on completing the transaction before clearance is received or any compulsory waiting period has ended? What are the risks in completing before clearance is received?

Transactions shall not be implemented before obtaining the merger control clearance. Premature implementation may cause the sanctions as provided in Article 48 of the AML (see the answer to question 3.3).

3.8 Where notification is required, is there a prescribed format?

An applicant who wishes to seek antitrust clearance in respect of their transactions are required to fill in a Notification Form for Merger Review of Concentration of Undertakings (issued by SAMR). The scope of the Notification Form includes the following headings:

  • general information relating to each party to the notified concentration (including business scope, information to do with subsidiaries or affiliates, etc.);
  • summary of the proposed concentration (including deal amount and steps taken thus far);
  • business rationale or motivations for undertaking the notified concentration;
  • market definition (product and geographic market);
  • industry overview (in relation to the relevant market);
  • effect of the concentration on the relevant market;
  • top five suppliers and customers in relation to each party to the concentration; and

other information in relation to competitors in the relevant market. All the required information should be included unless the parties can persuade SAMR that such information is not applicable to a specific case. For example, if the parties are basic material manufacturers, they may not have suppliers.

3.9 Is there a short form or accelerated procedure for any types of mergers? Are there any informal ways in which the clearance timetable can be speeded up?

MOFCOM launched the simplified merger control procedure in 2014. The notification form for the simplified merger control regime is shorter than the normal filing form, and requires less information. The simplified merger control procedure is applicable to the following situations:

  • Horizontal mergers where the collective market share of all undertakings is less than 15%.
  • Vertical mergers where the market share of each of the operators concerned in the concentration in each of the relevant upstream and downstream markets is less than 25%.
  • Mergers that are neither horizontal nor vertical, and where the market share of each of the operators concerned in the concentration in each of the markets is less than 25%.
  • Off-shore joint ventures which do not engage in any business operations in China.
  • Acquisitions of off-shore targets which do not engage in any business operations in China.
  • Reduction of the number of existing controlling shareholders where the joint venture jointly controlled by two or more operators is controlled by one or more existing operators through the concentration.

Despite meeting the above criteria, a notification may still be ineligible for a simplified procedure due to reasons such as the relevant market being difficult to define, or if the concentration may adversely affect market entry, technology development, consumers or national economic development.

On the other hand, most mergers are time-sensitive, and as a result, most merging entities generally wish for the merger review period and procedures to proceed as swiftly as possible. To assist SAMR in clearing merger filings smoothly and efficiently, we recommend the following approaches:

To speed up the clearance timetable, the parties need to have more communication with SAMR, and cooperate with SAMR to provide information as required. First, articulate why the merger is time-sensitive (e.g., one entity is a failing firm); second, ensure that the merger filing report is complete (according to the SAMR requirements) and accurate; and third, if SAMR asks any supplementary questions or asks for clarifications; respond to these questions in a timely manner.

3.10 Who is responsible for making the notification? The party acquiring control shall be responsible for making the notification.

Specifically, for a concentration of undertakings implemented in the form of merger, all the parties participating in the merger shall make notification; for a concentration of undertakings in other forms, the

undertaking that has obtained control shall make notification, and other undertakings shall cooperate. Moreover, if there are two or more undertakings who are obliged to notify, they could agree on that one of them is responsible for making the notification, or they can jointly make the notification. However, if the undertaking that is agreed to make the notification fails to do so, the aforementioned agreement shall not exempt other undertakings' legal liability for failing to notify the concentration in accordance with the law.

In addition, if the notification obligator fails to make notification of a concentration, the other undertakings participating in the concentration may propose to make the notification.

3.11 Are there any fees in relation to merger control?

There is no filing fee under China's merger control rules.

3.12 What impact, if any, do rules governing a public offer for a listed business have on the merger control clearance process in such cases?

There is no specific rule governing public offers for listed businesses that would affect the merger control clearance process.

In practice, during SAMR's review process, the acquiring party may face some practical problems in a hostile transaction. First, most of the parties do not sign any formal transaction agreements in the case of public tenders, which are normally required by SAMR to be part of the filing materials. However, SAMR may accept the public tender offer in lieu of a signed transaction agreement pursuant to Article 14 of the Guiding Opinions of the Notification of Concentration of Undertakings released by SAMR. Secondly, in a hostile transaction, the acquired target may not be cooperative in providing the information required in the filing, meaning that some non-public information, including the market data of the acquired target, may be difficult to obtain without the cooperation of the target. Even though Article 13 of the Guiding Opinions has provided

that the acquired target shall have the obligation to assist with the acquirer's filing, there are no specific rules about the legal liabilities for breaching such obligation to assist. As a possible solution, based on our experience, the acquiring party may apply for pre-notification consultation with SAMR under such circumstances, and SAMR would take a case-by-case approach to reviewing the notification.

3.13 Will the notification be published?

For cases prohibited or cleared with conditions, SAMR will publish its decision, which includes the review timetable, the analysis SAMR made, and the supplementary conditions, if any. For non1 conditional cleared cases, SAMR will publish a list which includes the names of these deals and date of approval on a quarterly basis. For cases subject to simplified procedure, SAMR will release a Public Notice Form which includes an introduction of the deal and reasons for applying simplified procedure on its website during the review period.

4 SUBSTANTIVE ASSESSMENT OF THE MERGER AND OUTCOME OF THE PROCESS

4.1 What is the substantive test against which a merger will be assessed?

Article 27 of the AML sets out the factors to be considered by SAMR in assessing the competitive effects of a merger:

  • market shares and market control power of the merging parties in the relevant market;
  • concentration levels of the relevant market;
  • impact of the concentration on market entry and technological development;
  • impact of the concentration on consumers and other relevant operators;
  • impact of the concentration on national economic development; and
  • other factors that should be considered.

On 5 September, 2011, MOFCOM released the Provisional Rules on Assessment of Competitive Effects of Concentration of Undertakings ("Competition Assessment Rules").

The Competition Assessment Rules set out the basic methodology for authority's competitive analysis and the basic elements for application of each factor in a merger review process. Market share/ market control power and market concentration levels appear to be considered as the most important factors.

4.2 To what extent are efficiency considerations taken into account?

According to the Competition Assessment Rules, efficiency is one of the factors to be considered by the authority in its competition assessment. There is no specific requirement as to the proof of the claimed future efficiencies. Since the full decision regarding approved cases without conditions is not published by SAMR, it

cannot be confirmed whether a case with competition concerns has been unconditionally approved based on efficiencies. Nevertheless, we are not aware of any apparently anti-competitive mergers has been cleared for the reason that the post-merger consumer benefits arising from efficiencies are believed in practice to outweigh the consumer detriments.

4.3 Are non-competition issues taken into account in assessing the merger?

Yes. In the Competition Assessment Rules (Article 12), non1 competition factors, such as public interest, economic efficiency, risk of bankruptcy of undertaking and the offsetting buying power will be taken into consideration in assessing the merger.

4.4 What is the scope for the involvement of third parties (or complainants) in the regulatory scrutiny process?

Third parties do not possess a statutory right to access merger control files, but they do possess a right to challenge mergers in the process of review.

In its review process, SAMR may seek opinions from third parties (including government agencies, industry associations and other entities) in respect of the proposed acquisition, and third parties may voice their opinions through these consultations. The opinion solicitation process is usually conducted through fax or telephone communication. Particularly, for the simplified merger control procedure, when a simple case has been formally accepted, SAMR shall publish an announcement of the case on its website for a period of 10 days. During the announcement period, any entity or individual (third party) can submit written comments to SAMR regarding whether or not the case shall be determined as a simple case. If the third party is of the opinions that the disclosed case shall not be determined as a simple case, objections can be raised to SAMR in the announcement period with relevant evidence and contact information supported. Where SAMR finds a case should not be qualified for simplified procedures, it shall require the notifying party to withdraw the case and refile under normal procedures.

4.5 What information gathering powers (and sanctions) does the merger authority enjoy in relation to the scrutiny of a merger?

If the documents and materials submitted by the applicant(s) are inadequate, incomplete or inaccurate, according to the Guiding Opinions on the Notification of the Concentration of Undertakings, the applicant(s) shall make supplements, revision, clarity and explanation within the time limit specified by the SAMR. Only

when the SAMR believes that the documents and materials for declaration, including the supplementary documents and materials, comply with Article 23 of the AML, it will accept the filing. SAMR has broader information gathering power to collect filing related information.

Article 52 of the AML states that persons who provide false or misleading information or any other act to refuse or obstruct an investigation may be ordered by SAMR to: make a correction; pay a fine of no more than RMB 20,000 (in the case of individuals) and no more than RMB 200,000 (in the case of undertakings); or (in cases where the case is "serious") a fine ranging from RMB 20,000 to RMB 100,000 may be imposed on individuals and a fine ranging from RMB 200,000 to RMB 1 million may be imposed on undertakings. Where the case constitutes a criminal offence, criminal liability may also be pursued in accordance with the relevant laws.

4.6 During the regulatory process, what provision is there for the protection of commercially sensitive information?

SAMR assumes responsibility for the confidentiality of certain confidential information submitted in the notification. No confidential information will be disclosed to third parties without the notifying parties' prior approval.

5 THE END OF THE PROCESS: REMEDIES, APPEALS AND ENFORCEMENT

5.1 How does the regulatory process end?

SAMR will generally issue a written notice of clearance. Unless the merger is prohibited or cleared with supplementary conditions (remedies), the decision will not be published or publicly announced.

5.2 Where competition problems are identified, is it possible to negotiate "remedies" which are acceptable to the parties?

Pursuant to Article 11 of the Rules on Review of Concentration of Undertakings, a range of remedies may be accepted by SAMR, including structural, behavioural and a mixture of both structural and behavioural remedies. So far, MOFCOM and SAMR has imposed conditions in [ ] cases, of which 60% are behavioural remedies, 20% are structural remedies and 20% are remedies composed of both behavioural and structural requirements.

The remedies will be included in the review decision to be published by SAMR on its website. The parties will also sign a formal undertaking to perform the remedies.

5.3 To what extent have remedies been imposed in foreign-to-foreign mergers?

SAMR has imposed both behavioural and structural remedies in foreign-to-foreign mergers. There is no difference in the approach adopted by SAMR when remedies are being negotiated for foreign1 to-foreign mergers compared to other mergers.

5.4 At what stage in the process can the negotiation of remedies be commenced? Please describe any relevant procedural steps and deadlines.

The negotiation of remedies can be commenced at any stage of the review process. There are no express provisions within the AML or in its accompanying regulations which provide for the procedural steps or deadlines.

5.5 If a divestment remedy is required, does the merger authority have a standard approach to the terms and conditions to be applied to the divestment?

Yes. MOFCOM issued the Rules for Restrictive Conditions on Concentration of Undertakings for Trial Implementation (the "Divestiture Rules") on 4 December, 2014 to set out the rules and procedures to do with divestiture.

According to the Divestiture Rules, undertakings who are required to divest assets pursuant to the merger control regime (known as "divestiture obligors") would have to divest their assets within a time limit stipulated in a merger control decision by the authority (if there is no such time limit provided in a merger decision, the divestiture obligors shall find the appropriate buyer and implement such divesture within six months since the issuance of the decision. Under certain exceptional circumstances, the authority may grant

an extra three months maximum to implement the divesture). Divestiture obligors may appoint a "supervision trustee" and a "divestiture trustee" to assist in the divestiture process. The former will supervise the divestiture process and the latter would assist with locating a purchaser, as well as assist with the actual sale process.

It is worth noting that since the decision on NXP's acquisition of Freescale in the end of 2015, the authority has been consecutively applied "the upfront buyer" requirement in its decisions with restrictive conditions. Furthermore, a tight time limit for the completion of the divesture is usually imposed in this situation. The rule for "the upfront buyer" is stipulated in Article 14 of the Divestiture Rules, requiring that the determination of the buyer of the business to be divested is the prerequisite of obtaining the authority's approval and the closing of the transaction. Up to now, current laws and regulations only specify the rule of "the  upfront buyer" ; however, there are limited regulations and cases related to the execution of this rule in practice. Nevertheless, considering the situations of recent cases, it can be reasonably predicted that the authority will apply "the upfront buyer" requirement in its future decisions with restrictive conditions. Furthermore, a tight time limit for the completion of the divesture is usually imposed in this situation.

5.6 Can the parties complete the merger before the remedies have been complied with?

Whether the parties can complete the merger before the remedies have been complied with is not provided in the AML or in its accompanying regulations. This may be addressed in the review decision of the merger.

5.7 How are any negotiated remedies enforced?

SAMR will supervise the enforcement of the remedies and request the parties to report to SAMR from time to time.

5.8 Will a clearance decision cover ancillary restrictions?

No, there is no clearance decision cover ancillary restrictions.

5.9 Can a decision on merger clearance be appealed?

Pursuant to Article 53 of the AML, entities that are not satisfied with a decision of AMB in respect of merger control may seek a review of the decision (i.e., administrative reconsideration) to SAMR. Entities who are dissatisfied with the decision of the SAMR may bring administrative proceedings before the courts (i.e., judicial review).

5.10 What is the time limit for any appeal?

To appeal the decision, undertakings need to apply for administrative review with SAMR within 60 days after knowing the AMB's decision. If the operator is still not convinced by the result of the administrative review, the operator could file for administrative litigation within 15 days after receiving the administrative review decision.

5.11 Is there a time limit for enforcement of merger control legislation?

The AML, including in its accompanying regulations, does not provide a time limit for enforcement of merger control legislation.

6 MISCELLANEOUS

6.1 To what extent does the merger authority in your jurisdiction liaise with those in other jurisdictions?

The antitrust enforcement agency has enhanced its cooperation with antitrust authorities in other jurisdictions. Since 2008, MOFCOM has signed memorandums of understanding (MoUs) on antitrust cooperation with around 10 countries, including the United States, European Union, Japan, South Korea, Canada, United Kingdom, Australia, Russia, South Africa and Kenya. In May 2016, all of China's antitrust enforcement agencies signed MoUs with competition authorities in the BRICs.

Take the MoU with the United States as an example: on 27 July, 2011, SAMR signed an antitrust MoU with its United States counterparts (i.e., the US Federal Trade Commission and Department of Justice). The MoU lists several specific areas for cooperation, including exchanging experiences on competition law enforcement, when appropriate; and seeking information or advice from one another regarding matters of competition law enforcement and policy.

We understand that MOFCOM regularly consults with the competition authorities from more experienced jurisdictions such as the United States and the European Union. According to MOFCOM, it had cooperated with the United States and the European Union competition enforcement agencies in more than 10 multi[1]jurisdictional transactions in the year of 2016. The competition authorities from these jurisdictions also conduct capacity building or technical assistance programmes for MOFCOM officials.

6.2 What is the recent enforcement record of the merger control regime in your jurisdiction?

1. Monsanto/Bayer – March, 2018

MOFCOM has conditionally approved the proposed merger of Bayer and Monsanto on 13 March, 2018, because the deal may eliminate or restrict competition in the Chinese markets for non1 selective herbicides and certain vegetable seeds, as well as the global markets for corn, soybean, cotton, rapeseed trait and digital

agriculture.

The conditions are that the concerned parties shall:

  • Divest Bayer's global vegetable seed, non-selective herbicide, and the above-mentioned trait businesses, including relevant facilities, staff, intellectual property rights, and other tangible and intangible assets.
  • Allow all Chinese agricultural application developers, based on fair, reasonable, and non-discriminatory terms, to connect their software with concerned parties' digital agricultural platform, as well as allow all local users to register and employ concerned parties' digital agricultural products and applications within five years after the products enter the Chinese market.

2. Luxottica/Essilor – July, 2018

SAMR has conditionally cleared the merger of Essilor International and Luxottica Group on 25 July, because the deal may have the impact of eliminating or restricting competition in the Chinese wholesale markets for mid-high-end optical lenses, low-end optical lenses, mid-high-end optical frames, low-end optical frames, and

mid-high-end sunglasses, and the Chinese glasses retail market.

The conditions are that the concerned parties:

  • Shall not conduct tie-in sales of glasses products without justifiable reasons, including but not limited to refusing to solely supply lenses, frames, sunglasses, or whole spectacles (and offer necessary trademark licensing) to Chinese glasses stores, as well as applying unreasonable conditions to transactions, excluding lens and frames supplied only in whole spectacles.
  • Shall offer the STARS program to Chinese glasses stores, which may independently choose to purchase frames and sunglasses through each party's wholesale system.
  • Shall not impose exclusive conditions on Chinese glasses stores (excluding stores of a single brand and franchise stores) or restrict them from selling lenses, frames, and sunglasses of rivals by improper means.
  • Offer glasses and essential trademark licensing in accordance with the fair, reasonable, and non-discriminatory (FRAND) terms, and not discriminate against trade counterparts.
  • Shall not sell glasses at prices lower than costs without justifiable reasons.
  • Shall notify the regulator of mergers with Chinese targets within 10 working days of signing the agreement.

3. Linde/Praxair – September, 2018

SAMR granted conditional approval to the proposed merger of Linde and Praxair on 29 September, 2018, because the proposed deal was likely to eliminate or restrict competition in the global markets for helium, inert rare gas mixture, fluorine-containing rare gas mixture, and hydrogen chloride rare gas mixture; and the markets for liquid oxygen and liquid nitrogen in Guangdong, China.

SAMR has imposed the following conditions on the parties:

  • Divestment of helium assets with a total annual production volume of 90 million standard cubic metres.
  • The transfer of helium-related customer contracts involving assets with an annual production volume of 90 million standard cubic metres with customers' consent
  • Assisting buyers in transporting the helium purchased under contract to China for processing and sale.
  • Divestment of Linde's stakes in four joint ventures in the province of Guangdong.
  • Finding buyers for the assets to be divested within six months from the issue of the regulatory notice and completing the transfer of ownership with SAMR's approval.
  • Supplying the Chinese market with inert rare gas, fluorine1 containing rare gas, and hydrogen chloride rare gas mixtures at reasonable prices and volumes in a timely and stable manner.

6.3 Are there any proposals for reform of the merger control regime in your jurisdiction?

The AML's amendment has been placed on the legislative agenda of the Standing Committee of the Thirteenth People's Congress. The possible amendment may include introducing the Fair Competition Review System, increased penalties for M&A gun-jumping, and revising the definition of monopoly agreements.

6.4 Please identify the date as at which your answers are up to date.

These answers are up to date as of 1 November, 2018.

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.

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