By Susan Ning, Shan Lining and Angie Ng, King & Wood’s Competition Practice
On 12 August 2010, the PRC Ministry of Commerce (MOFCOM) hosted a “stocktake” briefing to mark the second anniversary of the Anti-Monopoly Law (AML).(1) Director-General of the Anti-Monopoly Bureau Shang Ming chaired the briefing. MOFCOM’s transcript of this briefing is located here. The following were the salient points raised during the briefing.
- From 2008 to June 2010, MOFCOM accepted 140 merger review applications for review. Out of these 140 merger review applications, MOFCOM has completed review of approximately 90% of the cases.
- 95% of these merger reviewed were approved unconditionally. In the European Union (EU) and in the United States (US), on average only 93% of mergers are approved unconditionally.
- Thus far, only 5 mergers have been approved with conditions and only 1 merger was rejected (Coca-Cola’s proposed acquisition of Huiyuan).
- The merger control review process in China is divided into 3 stages. The first stage of review lasts no more than 30 days; the second stage of review spans for a further 30 to 90 days; and the third stage of review spans for a maximum of 60 days after the second stage. The entire merger control review process is not to exceed a total of 180 days.
- Out of all the mergers reviewed, more than half of the mergers were cleared within the first stage; the remainder of the mergers were cleared within the second and third stages.
- Shang Ming noted that the proportion of mergers entering the second stage of review was somewhat higher than that in the US or the EU. Shang Ming commented that at times, merger reviews enter the second stage of review not due to antitrust issues but due to process issues (e.g. MOFCOM undertaking public consultations etc).
- 62% of the merger applications received by MOFCOM are horizontal mergers; 14% of the merger applications received by MOFCOM are vertical mergers; and the remainder of the merger applications received by MOFCOM are conglomerate mergers.(2)
- A majority of the cases reviewed by MOFCOM involved business operators in the manufacturing industry. In addition, three-quarters of mergers accepted for review by MOFCOM involved public listed business operators.
- Shang Ming noted that some commentators believe that Chinese State Owned Enterprises (SOEs) obtain “special treatment” from MOFCOM pursuant to merger clearances. Shang Ming emphasised that this was not the case. All business operators, including SOEs, privately-owned companies and foreign companies are treated equally by MOFCOM.
- MOFCOM has received more merger clearance applications which involve foreign companies (as opposed to merger clearance applications which involve domestic companies only). Shang Ming said that this could be because the “financial strength” of these multinational foreign companies trigger the turnover notification thresholds more easily. In addition, Shang Ming also noted that since the global financial crisis, foreign multinational companies have been quite active acquirers.
It is timely for MOFCOM to conduct a stock-take of the merger control process in China, since its inception in 2008. It is interesting that a significant number of merger applications received by MOFCOM spill into the second stage of review. Shang Ming’s explanation that some of these “second stage review” merger applications do not necessary involve complex antitrust issues, but rather “process” issues, is also interesting.
In light of the above, companies that are interested in mergers or acquisitions that meet the turnover thresholds pursuant to the AML should ensure that they factor in the notification and review periods into their planning processes.
(1) The AML was enacted on 1 August 2008.
(2) The term “conglomerate mergers” refers to mergers involving businesses that operate in different product markets (i.e. they are neither “vertical” nor “horizontal” mergers).