The Provisional Measures on Investigating and Penalizing Violation of Notification Obligations for Concentrations of undertakings (hereinafter referred to as “Provisional Measures”) was officially published on 30th December 2011 by MOFCOM and will come into effect on 1st February 2012.
Such regulation has been for a long time called on given that not just a few undertakings often choose to escape MOFCOM’s jurisdiction in the antitrust review on concentrations, which reached the threshold by AML and relevant regulations, thus, has derogated MOFCOM’s enforcement effects.
In pursuance to Article 3 of the Provisional Measures, as expected, MOFCOM is the authority concerned in investigating and penalizing concentrations that are not notified in compliance with the law, and where necessary, provincial commence departments can be commissioned to assist MOFCOM regarding its work.
With the born of the Provisional Measures, undertakings’ escape encounters higher chance to be caught due to MOFCOM shall verify reports against concentrations that are not notified in compliance with the law.
Furthermore, Article 13 in the Provisional Measures answered the question paid most attention by enterprises, namely, of which level of penalty shall be imposed on violating enterprises. According to Article 13, MOFCOM could issue a fine not exceeding 500,000 RMB to the violating undertakings and order invested undertakings to restore their status as concerning concentration was not implemented, by taking the following measures:
(1) stop the process of concentration;
(2) dispose shares or assets within limited time dimension;
(3) transfer the business within limited time dimension;
(4) other necessary measures
It is not hard to be observed that the fining threshold in the Provisional Measures is too tiny-weenie compared to that in US and EU competition laws. In EU, the Commission has power under Article 14(2)(a) of the EUMR to impose fines, not exceeding 10 percent of the aggregate turnover of the undertakings concerned, on a party that intentionally or negligently, fails to notify a concentration prior to its implementation, therefore, would have more deterring force. However, it is argued that the reputational punishment based on Article 15 would possess more significance to the enterprises in China. Pursuing to Article 15 of this Provisional Measures, MOFCOM could publicize its decision on concentrations, which are not notified in compliance with the law prior to its implementation.
In addition, the Provision Measures also have procedural provisions on how to conduct the investigation by MOFCOM, confidentiality provisions, provision on remedying the invested and so forth.