Currently, there is an absence of legislation in China concerning gun jumping in the context of mergers and acquisitions. However, the Anti-monopoly Law (AML) could potentially be utilized as mode to curb and or prohibit gun jumping in the future. The following will attempt to analyze how the AML may be used in relation to gun jumping in the future.
First, we should consider what is meant by “gun jumping”. Although a comprehensive legal definition is lacking in both the European Union and United States of America, academia has provided some useful suggestions. For example, James R. Modrall and Stefano Ciullo in writing for the European Competition Law Review, define gun jumping as “the partial or complete implementation of a merger, acquisition or joint venture earlier than permitted under applicable merger control law”. Numerous examples of gun jumping have been found in the west, including; exchanging confidential information; posting an employee in a contentious position; and sharing price structures. All of which occur before the merger/acquisition receives formal clearance.
Seung Chong in his book (published in 2007), The Law and Practice of Mergers and Acquisitions in the People’s Republic of China, states the PRC does not have rules concerning gun jumping. Additionally, it is noted that no reported case of gun jumping has been brought before MOFCOM. The same is true for SAIC.
Though, what about the AML? Could it be utilized to prohibit/curb the potentially anti-competitive practice of gun jumping?
Under the (AML) Article 1 states the law is in place to guard against monopolistic conduct and Article 2 applies the AML to monopolistic conduct; monopolistic conduct is then defined in Article 3. Article 3 defines monopolistic conduct as a monopoly agreement, an abuse of dominant market status or a concentration of business operators. These terms are further defined in Articles 13, 17 and 20 of the AML.
It seems ripe infer that gun jumping could potentially be within the grasp of monopolistic conduct. For example, Article 17 in defining abuse of dominant market status makes reference to a catch-all clause in Article 17(7) which may apply to “other forms of abusing the dominant market status as determined by the Anti-monopoly Law Enforcement Agency under the State Council. Additionally, a similar catch-all clause is found in Article 13(6). In the context of gun jumping, most interesting is Article 20(3) which states concentration of business operators includes a situation where “a business operator acquires control over other business operators or is able to exert a decisive influence on other business operators by contract or by any other means”.
Considering the above and as an example, through the exchange of confidential information prior to formal approval of a merger/acquisition (an example of gun jumping), a business operator could retain the ability to exert decisive influence on other business operators and could therefore be caught by the AML.
Regardless of the above, there has been no formal clarification as to whether gun jumping is within the grasp of the AML and until the point is clarified through for example, the existence of a new measure, China will retain no formal prohibition for gun jumping activities.