China Law Insight : China Law Insight: China Commercial and Intellectual Property Lawyers and Attorneys, Full Service Law Firm: King & Wood

By Susan Ning, Shan Lining and Angie Ng

On 5 March 2011, China will implement its first National Security Review (NSR) regime.  This NSR regime will govern foreign acquisitions of domestic companies.  The precise boundaries of this NSR regime has been set out in a notice (specifically, a Notice on Establishing National Security Review by Foreign Investors issued by the State Council¹. ). 

We know, from the notice mentioned above that, broadly, a foreign-local transaction may only be caught if: (a) the foreign company acquires de facto control over a local company; and (b) the local company is involved in selling goods or services in relation to either national defense security or national economic security.  [Note that if a foreign company acquires a local company involved in selling goods or services in relation to national defense security, the threshold set out in (a) (i.e. de facto control) does not need to be established.  In other words, the transaction will come under the purview of the notice, despite there being no de facto control.]

This article outlines the above mentioned two thresholds (i.e. de facto control) and what is meant by national defense and national economic security in more detail.
 

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By: Susan Ning, Liu Jia and Yin Ranran

Recently, the Jiangsu Administration for Industry & Commerce ("Jiangsu AIC") issued sanctions against the Concrete Committee of the Construction Materials and Construction Machinery Industry Association of Lianyungang City ("Association") and 16 concrete manufacturers for breach of the Anti-Monopoly Law, by way of having entered into a monopoly agreement.  

This is the first publicly released enforcement decision by the SAIC (which delegated power onto the AIC) in respect of the Anti-Monopoly Law (AML), since the enactment of the AML in August 2008¹. 

The State Administration for Industry & Commerce ("SAIC") possesses the jurisdiction to govern and enforce non-price prohibitions in respect of the AML. And, according to the Article 10 of the AML and the Article 2 of the Procedural Rules by Administration of Industry and Commerce regarding Investigation and Handling of Cases relating to Monopoly Agreement and Abuse of Dominant Market Position, where necessary, SAIC may delegate to relevant AIC of a province, an autonomous region, or a municipality ("Provincial AIC") the authority of anti-monopoly law enforcement with regard to monopoly agreement and abuse of dominant market position.

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By King & Wood's Trademark Practice

On December 16, 2009, the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) of the People's Republic of China announced that it approved the registration of Cognac as a geographic indication, which is the first foreign geographic indication protected in China. On October 9, 2010, Scotch whisky was also recognized as a geographic indication, as a result of three-year discussion between the Scotch Whisky Association and the Chinese government. This will provide better protection for Cognac and Scotch whisky in China, which will also guarantee purchase of genuine Cognac and Scotch Whisky to the local consumers.

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By Susan Ning, Liu Jia and Angie Ng

We understand from media reports that on 18 February 2011, Hudong¹  (a Chinese internet search engine) made an Anti-Monopoly Law (AML) complaint to the State Administration for Industry and Commerce (SAIC) against Baidu²  (arguably the most often or commonly used internet search engine in China; often referred to as China's equivalent of "Google"). 

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By Richard  Wigley of King & Wood's Intellectual Property Group

China's packaged software market is estimated to "grow from $4.7 Billion in 2008 to $8.3 Billion by 2013, with a five-year CAGR of 12.1%"¹. China's domestic software industry has, however, long suffered from the effects of rampant software piracy, making it difficult for domestic industry players to proportionally benefit from China's economic rise over the past 30 years. Though the trials and travails of major global software companies, such as Microsoft, in China have been well-documented, domestic software companies, though with a seeming "home market" advantage, have often found it difficult to build viable business models in this environment. This environment for domestic software companies, however, appears to be changing for the better.

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By Yuan Min, Wang Jianzhao and Kirby Carder, King & Wood Insurance Department

Recently, the Shanxi Provincial China Insurance Regulatory Commission ("CIRC") provided a report on the results of its insurance industry transparency project. The overall goal of the project was to promote the stable, secure, and sustained development of the insurance industry in Shanxi province by meshing together government regulation, internal insurance ocmpany protocols, insurance industry self-regulation, and public participation in the insurance industry.

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By Richard Wigley and Chen Wenping of King & Wood's Intellectual Property Group

There has been a great deal of interest lately - both from inside and outside of China - in P.R.C. governmental policies aimed a promoting "indigenous innovation". In an April 2010 publication entitled "2010 Notification Regarding the Development of Determining ' Indigenous Innovation' Products (Draft Seeking Opinions)"  (hereinafter referred to as the "2010 Notification"), and jointly issued by the Ministry of Science and Technology, the Commission for Development and Reform, and the Ministry of Finance, some government initiatives in this regard were addressed. While it makes perfect sense for any country to promote "indigenous innovation" as a means of economic growth, it is valuable to look at one measure of  "indigenous innovation" --- invention patents. Specifically, it is valuable to look at the growth in recent years of invention patents granted in China, as just one indicator of  "indigenous innovation".

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By Susan Ning, Shan Lining, Yin Ranran and Angie Ng

On February 3, 2011, the State Council released the Notice on Establishing National Security Review Mechanism for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors ("Notice").   According to the Notice, China will implement a national security review process in relation to foreign funded mergers and acquisitions ("M&A") of domestic enterprises 30 days after the issuance of the Notice. A ministerial joint committee ("Joint Committee") led by the National Development and Reform Commission ("NDRC") and the Ministry of Commerce ("MOFCOM") will be set up to administer and enforce the national security review process. 

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By Susan Ning and Shan Lining

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ByYuan Min, Wang Jianzhao , and Kirby Carder, King & Wood Insurance Department, Beijing

The State Council has ordered the Foreign Enterprise Representative Institution Registration and Administration Regulations (Order of State Council No. 584) (《外国企业常驻代表机构登记管理条例》) to come into force on March 1st, 2011. This new regulation alters the rules for a foreign insurance institution to register a representative office in China, and it regulates the activities that a foreign insurance institution representative office can engage in once it is properly registered.

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By Xu Ping, Leading partner of King & Wood's Corporate Group

On February 3, 2011, the General Office of the PRC State Council issued the Notice Regarding the Establishment of National Security Review Mechanism for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (“国务院办公厅关于建立外国投资者并购境内企业安全审查制度的通知”) (the "Notice"), which will take effect 30 days after its promulgation. The Notice represents another major step that the Chinese government has taken in recent years in the area of regulating mergers and acquisitions (M&A) of domestic companies by foreign investors in China.

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By Susan Ning, Chai Zhifeng and Yin Ranran

In November 2009, the Ministry of Commerce of China ("MOFCOM") issued the decision to clear the Panasonic/Sanyo deal with conditions, one of which is for Panasonic to divest its nickel-hydride car batteries business in Japan.  On February 9, 2011, the sale was sealed with Panasonic selling this business to Hunan Corun New Energy Co., Ltd. for about RMB 40 million.

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By Richard  Wigley of King & Wood's Intellectual Property Group

As much as one may love to sit down with a nice hardcover book from one's favorite author, those days are changing, like much else in our lives in the digital age. The transition from obtaining information via traditional books to digital readers is growing around the world. It is estimated by DisplaySearch that the number of digital readers in China had grown to "3 million in 2010, which [] account[ed] for 2% of the global market." ¹ Aside from the current market leader globally, the Amazon Kindle, numerous Chinese manufacturers have also entered this marketplace with competing products, ² including many "shanzhai" or imitation products. ³ It is indeed a market with promise, even more so when one considers that with over 400 million internet users in China⁴ and well over 200 million users in China accessing the internet via mobile phones,⁵ the means to access e-books via various devices will only continue to grow.

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By Susan Ning and Huang Jing

Partly driven by the QQ-360 disputes (see our article entitled " The QQ / 360 Disputes - Who, What, Where, When and Preliminary Antitrust Analysis"), the Ministry of Industry and Information Technology  (MIIT) released the Interim Rules for Supervision and Management of Internet Information Service Market (Draft for Comment) (Draft Rules), on 12 January 2011.

The objective of the Draft Rules is to safeguard the competitive environment in relation to the internet information service industry, and to safeguard consumers' interests. Broadly, the Draft Rules sets out the code of conduct for internet information service providers (IISP), and dispute resolution mechanisms. 

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By Susan Ning and Liu Jia

Two and half years after the enactment of the Anti-Monopoly Law (AML), the anti-trust authorities in China (i.e. the National Development and Reform Commission (NDRC) and the State Administration for Industry and Commerce (SAIC)) issued detailed rules prohibiting abuse of dominance within their respective remit.

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