On July 30, 2024, China’s merger control authority, the State Administration for Market Regulation (“SAMR”), released its official statistics on the merger review cases in China in the first half of 2024. This note outlines the key statistics published by SAMR and extracts a few implications thereon for companies that keep an eye on China’s merger control practice.
1. SAMR Concluded 297 Cases in the First Half of 2024
According to the official release, SAMR concluded review of 297 concentration notifications in the first half of 2024, of which 282 were approved unconditionally. In addition, 14 concentration notifications were withdrawn by the filing party after SAMR’s formal acceptance. Up to date in 2024, there is only one remedy case released by SAMR, which is JX Nippon Mining & Metals Corporation’s acquisition of shares in Tatsuta Electric Wire & Cable Co., Ltd.
Notably, compared to the 797 cases totally reviewed by SAMR in 2023, the case number of the first half of 2024 is less than half of the total number of cases in 2023. This may be partly due to the significant increase in the turnover threshold released by SAMR in January 2024.
2. Vast Majority of Simplified Cases
Among the 297 concluded cases, the vast majority fall into the category of simplified cases, which were reviewed under the simplified review procedure and were approved in the preliminary review stage (“phase I”), namely within 30 days after formal acceptance. Specifically, a total of 262 cases of concentration of undertakings were reviewed under the simplified procedure, accounting for about 88%, with 256 cases closed in phase I, accounting for approximately 86%. That means only six simplified cases were not approved within 30 days after the formal acceptance of SAMR, indicating that most simplified cases could be given the green light within 30 days after acceptance. Taking account of the pre-acceptance review that usually takes around two to four weeks, the total merger review time for simplified cases in China averages around 6 weeks.
3. Foreign-to-Foreign Deals Still Accounted for A Fair Share
From the perspective of concentration types, there are a significant number of domestic deals alongside a considerable number of foreign-to-foreign transactions. Though the concentration notifications for transactions between purely domestic companies account for the biggest portion, with 170 cases in total accounting for approximately 57%, there is still a fair share of notifications for foreign-to-foreign deals, with 89 cases accounting for roughly 30%. The remaining is 38 concentrations between domestic and foreign enterprises, accounting for about 13%.
It is notable that foreign-to-foreign deals are also caught by China’s merger control regime as long as they amount to concentration under the Anti-Monopoly Law of China and reach the statutory filing threshold. Although foreign-to-foreign deals face lower risks of being investigated for gun-jumping compared to domestic deals in practice, it is observed that foreign companies are increasingly attentive to merger filing obligations in China, as China has become the third largest antitrust jurisdiction worldwide. This trend could be reflected in the above-mentioned case number related to foreign-to-foreign deals.
4. Horizontal Mergers Prevailed and Equity Acquisition Remained the Primary Transaction Mode
In the first half of 2024, there are 168 horizontal mergers between competitors, accounting for approximately 57%; 114 cases are associated with the vertical relationship, accounting for about 38%; and there are 109 conglomerate mergers without any horizontal or vertical relationships, accounting for roughly 37%. 156 concentrations take the form of equity acquisition, accounting for approximately 52%, whereas 145 concentrations are in the form of joint ventures, accounting for approximately 49%.
Notably, in the middle of June 2024, SAMR has released the exposure draft for the Guidance for Review of Horizontal Concentrations to solicit public comments. The fact that SAMR has at first drafted the guidelines for horizontal mergers, rather than their vertical or conglomerate counterparts, is possibly due to the prevalence of horizontal mergers in its merger review practice.
5. Transactions in Manufacturing Sectors Account for Highest Case Number
Regarding the industries involved in those 297 cases being reviewed by SAMR in the first half of 2024, most of them relate to the real economy and sectors involving people’s livelihood. The manufacturing industry in the real economy has the highest number of cases, with 101 cases, accounting for approximately 34%. Other industries with high transaction volumes include water, electricity, gas, and heat production and supply, wholesale and retail, finance, real estate, information technology services, transportation, etc.
From the perspective of segmented industry categories, electrical machinery and equipment of the manufacturing industry has the highest number of cases with 19, accounting for about 19% of the total number of manufacturing cases. Other segmented sectors with a high number of cases include computer and electronic equipment manufacturing, chemical raw material and chemical product manufacturing, automobile manufacturing, pharmaceutical manufacturing, etc.
In summary, this briefing provides an overview of China’s merger control practice in the first half of 2024 together with some implications, for the reference of companies that have dealings with such an area. We are closely monitoring any trends, developments and changes in China’s merger control regime and will provide further updates in the future.