Authored by Dr. Zhan Hao (zhanhao@anjielaw.com)

With an increase of the aggregate amount of insurance funds and adjustments of regulatory ideas of the insurance regulator, private equity investment and real estate investment by insurance funds have become heated topics in the relevant industries. In September, 2009, China Insurance Regulatory Commission (hereinafter referred to as CIRC) promulgated Interim Measures on Real Estate Investment by Insurance Funds and Interim Measures on Private Equity Investment by Insurance Funds (hereinafter referred to as IMPEIIF),triggering considerate discussion among real estate industry, various private equity funds, industrial funds, and venture capital funds who were all looking to opportunities.

However, in the following two years, as the two Interim Measures were too principle and there has been lack of implementation rules, we can rarely find a case where insurance funds have been made successful investment in real estate and private equity.

On July 16th,2012, CIRC promulgated Circular Regarding Private Equity and real estate Investment by Insurance Funds (No.59〔2012〕by CIRC, (hereinafter referred to as the Circular ),making adjustments to and clarifying policies for private equity investment by insurance funds. The Circular also refined the two Interim Measures in the interest of insurance funds which could hardly wait for setting sail.

Continue Reading AN ANALYSIS OF PRIVATE EQUITY INVESTMENT BY INSURANCE FUNDS & ITS LEGAL RISKS

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com)

Recently, a series of regulatory exposure drafts on application of insurance funds have been made by CIRC. Rule 11 of Interim Measures on Insurance Funds Trusteeship (Exposure Draft) states, unless otherwise stipulated by CIRC, the following relationships must not exist between trustee and trustor, trustee and overseas escrow agent: (1) one party directly or indirectly holds over 10% stocks of the other party; (2) a third party holds over 10% stocks of the two parties respectively. CIRC has been adhered to its concept of regulation, prohibiting the above-mentioned two equity-relations between trustee and trustor to guarantee the trustor’s independence.

In Current China, regulations regarding insurance assets trusteeship have raised widespread concern. Financial institutions as insurance assets management companies and other non-insurance assets managements companies show a keen interest in the issue and a series of relevant discussions are aroused.

Unclear Definition

Generally, trusteeship refers to an intermediary service, that is, some professional institutions, such as commercial bank, act as a third party, in accordance with relevant laws, regulations and  trusteeship contract, to undertake activities as accountant opening, custody of assets, settlement and delivery, assets estimate, accounting, investment supervision and etc, so as to protect the interests of the asset holders.

Continue Reading INSURANCE FUNDS TRUSTEESHIP BY A THIRD PARTY

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com)

On 13th August of 2012, MOFCOM granted a conditional approval on the concentration between Wal-Mart and f Niuhai Holdings Ltd (hereinafter referred to as NH) after a nearly 6-month review

MOFCOM received the concentration filing as early as Dec 16th,2011, and officially accepted the case on Feb 16th, 2012 after the supplemental filing. Through self-assessment and consultation with relevant governmental departments, industry association and main competitors, MOFCOM concluded that concerning concentration may lead to the effect of eliminating or restricting effective competition in the relevant market.

In this connection, Wal-Mart submitted proposed commitments to MOFCOM on July 3rd, 2012, who considered they can clear MOFCOM’s competition concerns after comprehensive assessment. In the end, Wal-Mart obtained the conditional approval from MOFCOM regarding its acquisition control on NH.

According to the concentration agreement concluded among the related parties, Wal-Mart shall increase its shareholding ratio over NH from 17.7% to 51.3% through its wholly–owned subsidiary company, GEC 2. NH shall take in hand the direct–sale business of online shopping platform Yihaodian of Shanghai Yishiduo E-commerce (hereinafter as YSD Yihaodian) through its wholly–owned subsidiary companies, Xingangling Hongkong Co. Ltd and NH Shanghai Corporation. Upon completion of the deal, Wal-Mart shall become the dominant shareholder of NH and take control of the direct-sale business of YSD Yihaodian through the intermediate, NH.

In light of Wal-Mart’s commitments, MOFCOM granted approval of the concentration under restrictive conditions. Wal-Mart shall fulfill the following obligations:

(1) NH Shanghai is limited to direct-sales through its own network platform.

(2) Before obtain the license for value-added telecom business, NH Shanghai after this concentration shall not provide network services for other dealers through its own network platform.

(3) Upon completion of the deal, Wal-Mart shall not undertake the value–added telecom business previously operated by Shanghai Yishiduo E-commerce Co. Ltd through VIE model.

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com)

The deal between United Technologies (hereinafter referred to as “UT”) and Goodrich has triggered widespread discussions and guess from both Chinese and foreign antitrust, business and economist circles. On June 15, 2012, MOFCOM finally disclosed its decision, issuing the fourteenth conditional approval on the UT/Goodrich deal on its Antitrust Bulletin.

The filing submission of this transaction can trace back as early as December 12, 2011; when MOFCOM received the notification on the contemplated concentration between UT and Goodrich. Perhaps being influenced by the Chinese New Year session, it took 56 days from the parties filed at the first time to MOFCOM officially accepted the filing (namely, clock for MOFCOM starts to tick).

Through comprehensive competitive assessment on the relevant market, consultation with relevant authorities, industry associations, main competitors, upstream and downstream market players and customers, MOFCOM found that the concentration at hand may eliminate or restrict competition in the market for “Aircraft AC Power Generation System”. In order to solve the aforesaid competition concerns, MOFCOM engaged several rounds of talks with the filing parties regarding the remedies. In the end, on June 6, 2012, the filing parties submitted a final commitment on how to resolve MOFCOM’s concerns, which was recognized by MOFCOM as sufficient to prevent potential competition concerns in “Aircraft AC Power Generation System” market; thus, the concentration was cleared in the end.

Continue Reading MOFCOM Imposed Conditions on United Technologies’ Purchase of Goodrich

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com)

On May 19, 2012 MOFCOM confirmed the conditional approval of Google’s purchase of US phone maker Motorola Mobility.

On August 15, 2011 Google and Motorola Mobility signed a purchase agreement, under which Google would acquire all shares of Motorola Mobility, which would then become a wholly owned subsidiary of the former. Thereafter, on September 30, 2011, MOFCOM received the notification regarding the concentration of undertakings through Google’s purchase of Motorola Mobility. Different aspects were reviewed by the relevant authority, such as the relevant market, free use of Google’s mobile software, Android, treatment of original equipment manufacturers by Google, Motorola’s patent obligations and market entry. However, the main aspect MOFCOM focused on when evaluating the concentration was its influence on competition within the relevant market.

With respect to the influence the concentration could exercise upon the relevant market, MOFCOM pointed out that it may affect competition by means of eliminating and restricting it. In order to solve the aforesaid issue MOFCOM engaged several rounds of talks. As a result, on May 15, 2012 Google submitted a final commitment on how to solve any competition issue thereby. After its evaluation, MOFCOM states that Google’s commitment could reduce the adverse effects of the concentration on competition, and, therefore, the concentration was approved.

According to the final commitment, which Google should fulfill the following obligations:

1. Google shall provide Android on a “free and open basis”.

2. Google shall treat all original equipment manufacturers on a non-discriminatory basis.

3. Google shall continue to comply with Motorola’s current fair, reasonable and non-discriminatory patent obligations.

4. Google shall appoint an independent superintendent to monitor and supervise the fulfillment of these obligations.

Conditions 1 & 2 are binding for a five-year period. Nevertheless, should market conditions have changed Google could ask for their modification or rescission. The superintendent’s report must be submitted to MOFCOM every six months. After expiration of the five-year period, MOFCOM may still monitor the situation and take any necessary decision according to market conditions.

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com)

On 18th April, 2012, the case of dispute on the abuse of dominant market position filed by Qihoo 360 (NYSE: QIHU) against Tencent (HKEX: 700) was heard in the Superior People’s Court of Guangdong Province, with the claim of 150 million RMB. It should be recognized that, whether in terms of the claim amount or close involvement in people’s everyday life of the goods or services provided by the two parties, the fact that 360 vs Tencent case has aroused wide attention is not a surprise.

Parties of the Case

The Plaintiff:

Qihoo 360 Technology Co Ltd (referred to as “Qihoo 360”), is engaged in the operations of Internet services and sales of third party anti-virus software in the People’s Republic of China. It provides Internet and mobile security products in China. In January 2011, the Company had 328 million monthly active Internet security product users, representing a user penetration rate of 83.9% in China.

Continue Reading 360 VS Tencent Impels the Growing up of Private Antitrust Litigation in China

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com)

On 4th May, 2012, the People’s Supreme Court issued the Regulations on Several Issues Concerning the Application of Law in relation to Trials of Monopoly Civil Disputes arising from Monopolistic Conducts (The “Judicial Interpretation”). This new Judicial Interpretations of Anti-Monopoly Law will take effect on 1st June, 2012. As the first issued judicial interpretation on the field of Anti-Monopoly law, it began to be drafted early since 2009. On 25th April, 2011, the People’s Supreme Court of China released the Draft version of the Judicial Interpretation to solicit public comments. Based on various public opinions, the official Judicial Interpretation freshly baked is different from the Draft version in some facets to some extent.

It is a fact that since 1st August 2008, when the Anti-Monopoly Law of PRC came into force, civil monopoly dispute cases have gradually become a very important type of lawsuits of People’s Courts. According to the Supreme Court’s records, as of the end of 2011, local courts in China have accepted 61 civil actions as courts of first instance under the Anti-Monopoly Law and have closed 53 of them. However, the civil monopoly dispute cases are normally difficult and complicated for the court proceedings whether in terms of anti-competitive agreements or abuse of dominant position. legal problems in such cases usually closely intertwine with economic data and analysis. Good understanding of specific field of economy is necessary with the view to analyze monopoly dispute cases. Indeed, some provisions of the Anti-Monopoly Law are highly principled and abstract. Provisions that refer to the operation of the People’s Court are stipulated relatively simple. Therefore, the issue of the Judicial Interpretation undoubtedly has a significant influence on the practical operation of the People’s Courts.

Continue Reading The First Judicial Interpretation on the Anti-monopoly Private Litigation in China

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com)

A spokeswoman from the Ministry of Commerce publicly declared in the recent, that the Ministry has officially accepted the notification on Nestlé’s acquisition of Hsu Fu Chi. If the Ministry turns on the green light for this filing it could be one of the biggest foreign takeovers of a Chinese undertaking historically.

Founded in 1866 by Henri Nestlé in Vevey, Switzerland, Nestlé is the world’s leading Nutrition, Health and Wellness company. Nestlé’s product lineup covers from baby food, bottled water, cereals, chocolate & confectionery, coffee, culinary, chilled & frozen food, dairy, drinks to food service, healthcare nutrition, ice cream, petcare, sport nutrition, and further to weight management.

Hsu Fu Chi is China’s largest listed confectionery company, with more than 16,000 sales outlets and 100 sales affiliates. In connection to its revenue, the first quarter of 2011 alone was Rmb1.51bn ($234m). Hsu Fu Chi focuses itself on chocolates, pastries and other sweets markets, and particularly is famous for a breakfast bar called Sachima. It should be recognized that Hsu Fu Chi already developed into a national brand within two decades. Voices from different communities, hence, expressed their worry that this event may ignite nationalist outcries just as it did with Coca-Cola’s negotiations with Huiyuan.

From a legal point and preliminary view, this concentration may bring about many anticompetitive effects. Firstly, both Nestlé and Hsu Fu Chi are strong market players in Chinese market with regard to their own products, respectively. (Without exact and concrete market share statistics though). Secondly, there is horizontal overlap between the two “Mr big”, namely, on the product market of confectionery. In a further consideration, the occurrence of penetrating effects between different markets of Nestlé and Hsu Fu Chi cannot be excluded from concerns in any means. Therefore, Nestlé’s action also triggered a school of worries that it may encounter the same judgment as Coca-Cola (KO) and juice maker China Huiyuan Juice Group in 2009.

As far as the author concerned, nevertheless, Hsu Fu Chi harbors still the hope of being cleared given that the following grounds:

Firstly, Hsu Fu Chi has not such a powerful market position as Coca cola has in consideration of the situation of confectionary market. (6.6% in 2009) Besides, it has been seen that the trend of mergers and acquisitions in China’s confectionery industry recent years has facilitated cooperation in many creative levels, and accordingly inflamed more fierce competition and more pressure on local players. Consequently, concerned acquisition here also give rise to many precompetitive effects on the relevant market.

All in all, how the Ministry assess and balance the concentration at issue is still of full suspicion.

On 15th February of 2012, several fundamental policies for economic reform of China in 2012 have been settled down through the Executive Meeting of the State Council (hereinafter referred to as “the Meeting”). To promote the development of diverse forms of ownership, push reforms of strategic adjustment of state-owned economy and turning state-owned enterprises into standard joint-stock companies, to improve and implement the policies and measures in order to promote development of non-public ownership economy, encouraging private capital to enter the railway, municipal, financial, energy, telecommunications, education, medical and other fields. The above slogans have been highlighted in the Meeting.

Continue Reading Updates in Anti-Monopoly