Authored by Dr. Zhan Hao (email@example.com)
With more than four years’ experience, the Ministry of Commerce of PRC (“MOFCOM”) is becoming an increasingly important and high-profile merger review jurisdiction in the globe. As of 30th December, 2012, MOFCOM has handled 533 cases in total, which is quite striking. With regard to both the legislation and law enforcement, MOFCOM have gained impressed progress.
There are eight concentration-related supporting regulations or guidelines have been enacted between 2008 and 2011 in all. In the passing 2012, MOFCOM mainly focused on proceeding supporting legislation in two aspects.
One is rules on imposing conditions on concentrations, before which MOFCOM issued the Interim Provisions on Asset or Business Divestiture in Concentration between Undertakings in 2010. With the target to summarize experience in implementing this Interim Provisions and address discovered problems, MOFCOM decided to enact a new legislation to make a full range of regulation on the proposal, assessment, implementation, supervision, modification of conditions on the concentration as well as the liability issue.
The other vital legislation project in 2012 is Provisions on Applying fast-track Procedure in Concentration cases, which is intended to increase the efficiency of law enforcement. Indeed, it sees a tendency of gradually increased concentration notification cases. According to statistics, 16 cases are concluded in 2008, 78 cases in 2009, 109 cases in 2010 and 171 cases in 2011. 2012 would see an approximately same amount of concluded concentration cases with 2011. Therefore, without a fast-track procedure for conducting antitrust review on concentrations, the enforcement authority would have difficulty in focusing on significant and complicated cases.
For the interests of enterprises, the potential establishment of fast-track procedure would be also good news without doubt, which could shorten the review time of MOFCOM to some extent. Nevertheless, it is not expected that the planned fast-track mechanism may significantly shorten the merger review process of PRC.
1. In terms of the numbers of cases that being notified with MOFCOM and cases that being officially accepted, it witnessed a trend of gradual increase. 17 and 77 cases were notified with MOFCOM in 2008 and 2009, respectively; and all of them are officially accepted. In 2009, MOFCOM has seen a sharp rise of case amount; 136 cases were notified with MOFCOM and 118 of them were officially accepted. Up until 26th December, 2012, MOFCOM received 201 concentration notification cases, officially accepted 186 cases in total. It is estimated that the case number in 2013 and 2014 would still stable around 200.
2. With regard to the form of cases, a major proportion of concentrations accepted by MOFCOM adopted the mean of security acquisition. For example, there are 101 cases relating to security acquisition (62% of concluded cases) in 2011. In 2012, 71 concentration notifications involve security acquisition (55% of concluded cases).
Besides, establishment of joint venture is also viewed as a significant form of concentration in MOFCOM’s eyes. Unlike in EU, where only full-function joint venture would be treated as a “concentration”; while all joint ventures regardless of whether they are full-function or part-function in the current stage in PRC antitrust realm usually are treated as “concentration”, thereby bear the obligation of notifying with MOFCOM as long as they reach relevant threshold.
According to the data released by MOFCOM, there are 49 concentrations by way of establishing joint venture (30% of concluded cases) in 2011 and 70 concentration notifications involve establishment of joint venture (around 34% of concluded cases) in 2012.
3. With respect to the nature of concentration cases, the majority cases are horizontal concentration between competitors. In 2011 there are 97 horizontal concentration cases, 13 vertical concentration cases and 42 conglomerate concentration cases have been notified with MOFCOM, which account for 60%, 8% and 26% respectively. Up until November of 2012, the number of horizontal concentration cases is 80, accounting for 65% of all.
4. In addition, most of concentrations happened in manufacturing industries, including petroleum, chemical, mechanical manufacture, automobile, shipping, aircraft, mining, etc. In 2011 the number of concentrations in manufacturing, IT, wholesale and retail industry is 107, 13, and 12 respectively. There are 74 concentrations in manufacturing industry, which is slightly lower than in 2011.
5. Another attractive phenomenon is that 2012 has been witnessed as the year that conditional approvals are issued most by MOFCOM since the Anti-Monopoly Law (“AML”) entered into force in 2008. The number of conditional approval from 2008 to 2012 is 1, 4, 1, 4 and 6 respectively.
6. According to AML, MOFCOM is only required to publicize conditional approvals and prohibition decisions. In order to increase the transparency of law enforcement, nevertheless, MOFCOM started to disclose all unconditional approved cases on its website from the end of 2012, which are 517 cases in total as of 30th December, 2012. It is announced that such information would be disclosed by quarterly summery hereafter.
7. From the beginning of last year, MOFCOM started to focus on the issue of investigation on un-notified concentrations. Up until now, MOFCOM received 3 reports, two of which have been verified and the other one is still under examination of report materials, as reported.
Although the Provisional Measures on Investigating and Penalizing Violation of Notification Obligations for Concentrations of undertakings has provided the level of penalty which shall be imposed on violating enterprises, it is hotly commented that the penalty level is not high enough to have deterrence effect. However, it is also argued that the reputational punishment based on Article 15 would possess more significance to the enterprises having business in China.
8. Regarding the timing of MOFCOM’s review process, set forth below is some historic data disclosed:
Case name Filing date Date of being accepted Duration
InBev / Anheuser-Busch 09/10/2008 10/27/2008 37 days
Coca Cola/ Huiyuan 09/18/2008 11/20/2008 62 days
MitsubishiRayon Co. 12/22/2008 01/20/2009 28 days
/Lucite International Group
Pfizer Inc/Wyeth 06/09/2009 06/15/2009 7 days
Panasonic/Sanyo Electric 01/21/2009 05/04/2009 103 days
GE/Delphi 08/18/2009 08/31/2009 13 days
Novartis/ Alcon 04/20/2010 04/20/2010 0
Uralkali/ Silvinit 03/14/2011 03/14/2011 0
Penelope/ Savio 07/14/2011 09/05/2011 51 days
GE/Shenhua Group 04/13/2011 05/16/2011 33 days
Seagate/Samsung 05/19/2011 06/13/2011 24 days
Henkel (Hong Kong)/ 08/08/2011 09/26/2011 48 days
West Digital/Hitachi 04/02/2011 05/10/2011 38 days
Google/Motorola 09/30/2011 11/21/2011 52 days
Goodrich/UTC 12/12/2011 02/06/2012 56 days
Walmart/Niuhai 12/16/2011 02/16/2012 61 days
Advanced RISCMachines/ 05/04/2012 06/28/2012 55 days
Case name Date of being accepted Date of decision Duration
InBev / Anheuser-Busch 10/27/2008 11/18/2008 21 days
Coca Cola/ Huiyuan 11/20/2008 03/18/2009 118 days
MitsubishiRayon Co. / 01/20/2008 04/24/2009 94 days
Lucite International Group
Pfizer Inc/Wyeth 06/15/2009 09/29/2009 106 days
Panasonic/Sanyo Electric 05/04/2009 10/30/2009 176 days
GE/Delphi 08/31/2009 09/28/2009 28 days
Novartis/ Alcon 04/20/2010 08/13/2010 113 days
Uralkali/ Silvinit 03/14/2011 06/02/2011 78 days
Penelope/ Savio 09/05/2011 10/31/2011 56 days
GE/Shenhua Group 05/16/2011 11/10/2011 174 days
Seagate/Samsung 06/13/2011 12/12/2011 180 days
Henkel (Hong Kong)/ 09/26/2011 02/09/2012 133 days
West Digital/Hitachi 05/10/2011 03/02/2012 297 days
Google/Motorola 11/21/2011 05/19/2012 180 days
Goodrich/UTC 02/06/2012 06/15/2012 130 days
Walmart/Niuhai 02/16/2012 08/13/2012 181 days
Advanced RISCMachines/ 06/28/2012 12/06/2012 179 days