In China, the fundamental legislation for merger control is the Anti-monopoly Law of the People’s Republic of China (AML) (1 August 2008).
There also exist other implementing regulations and regulatory guidance, which give more guidance on China’s merger control practice and key rules. These are set out below.
In addition, on 2 January 2020, the State Administration for Market Regulation (SAMR) released a draft amendment to the AML (the Draft Amendment) to invite public comment. It also released a draft of the Interim Provisions on Review on Concentrations of Undertakings on 7 January 2020, which is intended to consolidate the rules of:
Therefore, it is expected that the revision of some existing merger control rules will be reflected in the final version of the above-mentioned legislation.
The Foreign Investment Law and the Regulations for the Implementation of the Foreign Investment Law have been effective since 1 January 2020. According to these new pieces of legislation, if a foreign investor participates in the concentration of undertakings in any way, it shall go through a review of the concentration of undertakings conducted in accordance with the AML.
It should also be noted that the method used for the calculation of turnover for the financial industry is distinct from other sectors and is stipulated in the Method to Calculate Turnover of Financial Industry in Notification of Concentrations between Undertakings.
Since 2018, the newly established SAMR, founded on the basis of the original State Administration for Industry and Commerce (SAIC), has been the sole antitrust enforcement authority in China and, accordingly, is responsible for the enforcement of merger control legislation. The SAMR has established an Antitrust Bureau, within which three divisions are specifically responsible for reviewing merger filings.
Under the normal procedure, during the review process of concentration notifications, the enforcement authority will seek opinions from relevant industry regulators, such as the Ministry of Industry and Information, the National Development and Reform Commission (NDRC) and the Ministry of Transportation.
In China, if a transaction constitutes a concentration, and the notification threshold is satisfied, the transaction should be compulsorily notified to the SAMR for merger review. In practice, to determine whether a filing with the SAMR will be required for a proposed transaction, tests will be conducted to:
Undertakings are exempted from filing a notification of concentration with the SAMR if either of the following situations is satisfied:
Undertakings may voluntarily file a notification even where the statutory threshold is not reached. However, the SAMR will only accept the notification where it thinks it necessary to do so.
If undertakings implement the concentration while failing to notify, the SAMR may order the undertakings to stop the concentration, to dispose of shares or assets, to transfer the business or adopt other measures necessary to restore the market situation in existence before the concentration within a time limit, and can impose a fine of up to CNY500,000 (approximately USD72,500).
In practice, from 2008 when the AML took effect to date, the monetary fine is the only type of penalty which has been imposed on undertakings failing to notify. As none of the concentrations that were investigated due to failing to notify were deemed to have the effects of eliminating and restricting competition, penalties such as orders to stop the concentration, to dispose of shares or assets, to transfer the business or to adopt other necessary measures to restore the market situation have not been imposed.
Penalty decisions for cases which have been investigated after 1 May 2014 are made public on the enforcement authority’s website, which is usually viewed as a kind of reputational penalty. This matters a lot to public companies in practice.
Notably, the Draft Amendment on 2 January 2020 has proposed harsher penalties for failure to notify, that would increase the maximum fine to 10% of the violating undertaking’s sales revenues in the preceding year. However, both the timetable for the amendment's adoption and whether this rule will be put in the final version are still uncertain.
The types of transaction which constitute concentrations usually include mergers, equity acquisitions or assets acquisitions, as well as the new establishment of joint ventures which are jointly controlled. Undertakings not involving the transfer of shares or assets may also be subject to notification if they acquire control over, or exert decisive influence on, other undertakings by way of contract or through other means.
Internal restructurings or reorganisations meeting one of the following requirements are exempted from filing a notification with the SAMR:
Control includes sole control and joint control, and can be understood as both decision-making power and veto rights. In general, the following factors shall be taken into consideration in determining whether an undertaking gains control over another undertaking:
Generally, concentration agreements and the articles of association of the target are important bases for judgment.
Sometimes, acquisitions of minority or other interests may constitute a de facto change of control due to a variety of reasons, such as the widely dispersed ownership of the target.
The notification thresholds are as follows:
There are no special thresholds applicable to particular sectors, though the calculation method of the turnover for financial industry undertakings is different.
As stated in 2.5 Jurisdictional Thresholds, the thresholds are turnover-based rather than asset-based. Turnover includes revenues generated from product and service supply, deducting relevant taxes and surcharges.
If the turnover is in a foreign currency, it should be converted into renminbi. Normally, the average value of the central parity rate in the corresponding fiscal year announced by the People's Bank of China would be applied.
The turnover of an individual undertaking shall be the total turnovers of all the following undertakings:
The total turnover of an individual undertaking to the concentration shall not include the turnover that is generated from transactions between undertakings referred to in the first four points above.
If, after the transaction, the seller will no longer have control over the target company, only the turnover of the target company, rather than that of the seller, shall be calculated.
The turnover of an individual undertaking participating in the concentration shall not include the turnover of undertakings which have been sold or were no longer controlled in the preceding fiscal year or before.
As long as foreign-to-foreign transactions constitute a concentration of undertakings and meet any of the turnover thresholds, such transactions are subject to merger control.
Based on the turnover thresholds, the PRC turnover of at least two undertakings in the previous fiscal year should exceed CNY400 million (approximately USD58 million). This means at least two undertakings have turnover generated from customers located within the territory of China.
Even if the target does not have sales and/or assets in China, as long as each of two undertakings participating in the concentration has sales in China which exceed CNY400 million (approximately USD58 million), that transaction is still required to be filed for notification in China.
There is no market-share threshold in China. However, eligibility for the simplified filing procedure under the AML is based on market share among other factors.
The new establishment of a joint venture which is jointly controlled by at least two undertakings is subject to merger control. If a joint venture will be solely controlled by a single parent, it will not be subject to merger filing obligation. The turnover thresholds mentioned in 2.5 Jurisdictional Thresholds should be applied to determine whether the new establishment should be noticed to the SAMR. There are no special rules for determining whether joint ventures meet the jurisdictional thresholds or not.
Where a concentration which does not meet the notification thresholds, but for which there are facts and evidence indicating that the concentration has or may have the effect of eliminating or restricting competition, the enforcement authority shall investigate that concentration in accordance with the laws. For instance, although it was reported that the Didi’s acquisition of Uber China had not reached the threshold of notification, the merger review agency announced that it had conducted an investigation of this deal.
The implementation of a transaction which is subject to notification must be suspended until clearance has been obtained from the SAMR. Otherwise, the SAMR may deem the implementation as “gun-jumping” and may penalise the undertakings involved.
The penalty applied in practice is a fine of less than CNY500,000. And penalty decisions after 1 May 2014 are made public on the enforcement authority’s website. Such penalties will be imposed in cases of failure to notify, regardless of whether they are foreign-to-foreign transactions or domestic transactions.
The Draft Amendment proposes to increase the penalty to up to 10% of the sales revenue in the past year. However, both the timetable for the amendment's adoption and whether this rule will be put in the final version are still uncertain.
There are no provisions regarding general exceptions to the suspensive effect.
The undertakings are not permitted, under any circumstances, to implement the concentration before obtaining clearance from the enforcement authority.
The AML does not articulate any deadline for notification. However, Article 21 of the AML provides that the concentration shall not be implemented where the filing has not been made. In another word, the deal closing will be delayed if the filing parties delay in notifying. Therefore, in practice, undertakings have an incentive to notify as early as possible after the concentration agreement is signed.
The SAMR requires, in principle, a binding concentration agreement for notification. For a listed company, a publicly announced tender offer in the context of acquiring a listed company could be regarded as a formal concentration agreement via a public offer.
If, due to their particular situation, the parties cannot sign the binding agreement at this stage, as is the usual practice, the SAMR is likely to refuse to accept the notification materials unless the parties can provide sufficient evidence to justify why they could not provide formally signed concentration agreements when filing. Such evidence includes:
Alternative written materials, which could ensure the certainty of the transaction, may be supplied, such as the memorandum of understanding or the unbinding framework agreement, the draft of concentration agreement, the tender offer, etc. In spite of the afore-mentioned, in practice, it is not common for the SAMR to accept these informal documents as the concentration agreement.
No filing fees are required.
Article 9 of the Measures for the Notification of Concentration of Undertakings (the Notification Rules) stipulates which parties are responsible for filing under various circumstances:
Other parties concerned are obliged to co-operate with the filing. This consideration could cover a situation in which the responsible party cannot obtain the necessary information.
Furthermore, when the responsible party fails to file the notification, other parties concerned may file voluntarily. This measure is provided in order to ensure notification is filed before the transaction is implemented.
The documents required to be included in a filing are as follows.
The notification documents and materials shall be provided in Chinese. Where the documents and materials are written in a foreign language, a Chinese translation together with the original version shall be provided simultaneously. In the event that the original documents are relatively long, the filing parties may submit a Chinese summary. However, depending on the case-handler’s request, a full translation may also be required.
Normally, the notification documents should be submitted in paper form in addition to an electronic copy stored on a disc. Because the current COVID-19 pandemic prevents the on-site form of submission, the SAMR has adopted measures to accept notification documents via email or courier, and is issuing all formal notices – including requests for information (RFI), notices for case acceptance, etc – through email or fax.
After receiving the filing documents, the SAMR will, in advance of officially putting the notification on record, normally issue to the filing parties at least one list of questions (RFI), requiring the parties to answer the questions and provide supplementary documents within the specified time. If the filing parties fail to reply in time, the transaction may be deemed not notified to the merger review agency, subject to the discretion of the case-handlers. Furthermore, if the replies fail to provide sufficient information for the requests on the first question list, at the discretion of the agency, a second question list, or more questions (in oral form), may be issued. The current practice is for the SAMR to issue only one round of RFI for most simple cases.
Before the SAMR puts the notification on record, if the filing parties deliberately provide inaccurate or misleading information in the filing, the formal review process will not be triggered.
Once the notification has been put on record, and the review process has therefore been initiated:
To date, no publicly available sanction decision with regard to the aforementioned behaviour has been made.
It is noteworthy that, the Draft Amendment proposes to increase the fines for individuals up to CNY1 million and, for a company, up to 1% of sales revenues in past year or up to CNY5 million if that company did not generate any revenue in the past year.
According to the AML, the review process may be divided into three phases.
Normally, cases that may be conditionally approved or prohibited would go into Phase III, but in practice some normal procedure cases were also extended to this stage.
For complicated cases, particularly cases where remedies may be imposed, the parties may withdraw the notification and refile if remedies cannot be agreed in the three statutory phases. In such circumstances, the reviewing period will be much longer.
The SAMR is open to parties’ requests for pre-notification consultancy. It especially encourages pre-notification consultancy if the circumstances are complex.
In practice, a written letter to the SAMR is required before the pre-notification discussion. The SAMR will not disclose information regarding pre-notification discussions. The responses of the SAMR to the pre-notification discussion do not represent the formal opinion of the SAMR and do not have binding effect.
Before the SAMR puts on record a notification, it normally requires at least one round of RFI (see also 3.6 Penalties/Consequences of Incomplete Notification). The statutory limit of merger review will not start to calculate until the notification is put on record.
After the notification has been put on record, it is common for the SAMR to require further information to be provided. Information requests will not stop the clock of the merger review process.
Almost all simple cases are cleared in Phase I. Therefore, transactions qualified as simple cases may expect a shorter time for clearance.
The criteria for qualifying as a simple case and applying simplified filing procedure are as follows:
In practice, the first three criteria should be met together for applying the simplified filing.
Furthermore, in the period of the COVID-19 pandemic, the SAMR has established a “green channel” in order facilitate accelerating the merger control review process. The green channel applies to cases relating to pandemic prevention and people’s basic livelihood such as pharmaceutical manufacturing, food production, transportation and retail, and in the sectors severely hit by the pandemic such as catering, accommodation and tourism, as well as those conducted for the purpose of work resumption.
According to Article 28 of the AML, the substantive test employed is “whether the concentration results in, or may result in, effects of eliminating or restricting competition”. If so, the SAMR will make a decision to prohibit the concentration. However, if the undertaking concerned can prove that the positive influence brought about by the concentration of competition is obviously greater than the negative impacts brought about thereby, or the concentration conforms to the social public interest, the merger review agency may make a decision not to prohibit the concentration.
The SAMR defines the relevant markets based on the nature of the concentration. For a horizontal concentration, the overlapping of markets would be the starting point of market definition. For a non-horizontal concentration (which mainly refers to vertical and/or conglomerate concentrations), markets that are related to the concentration would be defined.
The antitrust laws do not set up a “Safe Harbour-type” exemption. No matter what kind of review process is being carried out or what market shares notification parties have, the assessment of a transaction’s competitive effect will be carried out based on the theories of competition harm and the factors provided in Article 27 of the AML as follows:
Although there is no specific de minimis level below which competitive concerns are deemed unlikely, simple cases are usually unlikely to raise competition concerns, where the combined market share of the parties in the overlap market does not exceed 15%.
In practice, the merger review agency may refer to the market definitions of merger filing cases from other jurisdictions to some extent, especially when the case involves a relevant market that has not been identified previously.
If the case is reviewed in other jurisdictions simultaneously and a foreign agency (especially the EU commission or the FTC or DOJ) has cleared the notification in advance, the SAMR may take into account their counterpart’s decision for reference.
However, the authority will make an independent decision in its assessment, including on market definition. For instance, the SAMR granted its conditional approval for Nvidia’s proposed acquisition of Mellanox on 16 April 2020, even though this case were cleared without remedies in all of other jurisdictions, including the EU, Mexico and the USA.
Generally, the basic analytical framework to assess competition concerns is “ability–incentive–effect”. This methodology is also reflected in Article 4 of the Interim Provisions on Assessment of Impact of Concentration of Undertakings on Competition, which provides that the unilateral effects would be the primary concern, and if the relevant market is relatively concentrated, the co-ordinated effects will come to the attention of the merger review agency and be explored. If the undertakings concerned are not actual or potential competitors in the same market, the agency would focus on vertical concerns (in concentrations where upstream and downstream markets are involved) or conglomerate/portfolio effects (in concentrations where adjacent markets are involved).
To be more specific, market concentration is one of the important factors to be taken into consideration when assessing the impact of a concentration of undertakings on competition. The merger review agency usually uses the HHI Index or CRn index to measure the market concentration. In the meantime, the offsetting effect of entry of potential competitors could also be evaluated.
Notably, in 2019 the SAMR (Shanghai branch) imposed a punishment on Eastman China for abusing its dominance in the market for CS-12 coalescent. Critical loss analysis and the Lerner Index were used in a public enforcement decisions for the first time. The Eastman case is a strong indication that the SAMR will be more concerned with economy analysis.
Promoting economic efficiencies is a statutory goal of the AML, and thus the merger review agency will consider economic efficiencies associated with the concentrations during the process of a merger review.
The promotion of economic efficiencies brought by concentration could be described as:
The merger review agency is also cautious with respect to the negative effect of concentrations, for instance, increasing the market power of the filing party, and enhancing its ability to eliminate or restrict competition, impairing the interests of consumers, etc.
Apart from economic efficiency, the SAMR will also consider the impact of a concentration on public interest, industrial policy, whether a filing party is in danger of impending bankruptcy or whether there exists any countervailing buyer power, etc.
In practice, and especially in high-profile cases, the merger review agency may emphasise the impact of a concentration on industrial policy. For example, the prohibited Coca-Cola/Huiyuan Juice transaction, and the conditionally approved Corun/Toyota China/Primearth EV Energy/Changshu Xinzhongyuan/Toyota Tsusho transaction reflected the agency’s concerns over the impact of the concentrations on China’s industrial development. Industrial concerns and the impact of concentrations on the development of the whole industry were also recognised as one of the reasons that the concentrations did not obtain a clearance or an unconditional clearance.
In addition, as previously mentioned, the merger review agency will seek opinions from relevant industry regulators on the proposed transaction under normal procedures. In this consultation process, the interests of industrial policy and the public interest may be considered to a large degree.
The AML does not provide for the concept of a “full-function joint venture” as conceived of in EU law. In practice, a non-full-function joint venture could not be exempted from notification.
It is possible that the SAMR might consider possible co-ordination issues between joint venture parent companies; however, in a decision in which it conditionally approved the establishment of joint ventures, issues of possible co-ordination seem not to have been addressed.
The AML authorises the SAMR to prohibit a concentration of undertakings where that concentration may have an eliminating or restricting effect on competition unless the undertakings prove that the positive impact of the concentration on competition far outweighs the negative impact or that the concentration is otherwise in the public interest. The Rules on Restrictive Conditions on the Concentration of Undertakings (for Trial Implementation) (the Restrictive Conditions Rules) and the Measures for Review on Concentrations of Undertakings (the Review Measures) further stipulate that the merger review agency shall block the deal if the filing parties do not submit their remedy/commitment proposal within 20 calendar days before the statutory deadline of Phase II review process in response to the SAMR’s competition concerns, and that the proposal is deemed insufficient to mitigate the negative effect on competition in the event that the concentration has an eliminating or restricting effect on competition.
In addition, the SAMR has the power to impose restrictive conditions on the concentration of undertakings in order to alleviate the negative impact. The SAMR shall publicly announce the decision of prohibiting the concentration of undertakings or the decision of imposing restrictive conditions on the concentration of undertakings, and inform the parties of that decision.
Generally, in practice, the SAMR will inform filing parties of its competition concerns during the Phase II review process and would not enter into the commitment-negotiation process until it had officially put forward those concerns.
Once the competition concerns are raised by the authority, filing parties could propose to undertake a structural remedies, a behavioural remedies, or a combination of the two. The SAMR may negotiate with the filing parties for revisions and adjustments for several rounds until the proposal is deemed adequate. The filing parties will not be compelled to agree to the proposal but if no agreement can be reached and the competition concerns cannot be relieved, the SAMR will disallow the transaction.
Articles 5 to 9 of the Restrictive Conditions Rules stipulate that the remedy proposal proposed by the filing parties should satisfy three criteria, ie, effectiveness, operability and promptness. First, the remedy proposal should be effective enough to eliminate the anti-competitive effects on the relevant market; second, the remedy proposal shall be practically operable; and last but not least, the remedy proposal should promptly solve the competition concerns that existed in the concentration.
There are three conditions that can be imposed on a concentration of undertakings:
Based on precedents, most remedies are imposed to address competition issues. For other non-competition concerns that may be raised by the SAMR during merger control review, such as the impact on the public interest or the national economy, the SAMR has typically imposed firm restrictive conditions explicitly tailored to the non-competition issues in question.
Generally, the parties can begin negotiating remedies with the authority once they are informed of competition concerns during the Phase II review process. The authority might also propose or imply certain remedies on their own motion. In addition, the parties may also put forward remedy proposals at an earlier stage before the SAMR has informed them of the competition concerns.
The Review Measures and the Restrictive Conditions Rules stipulate the determination process for restrictive conditions that, during the whole process of merger review, filing parties shall be entitled to submit as remedy proposals to the Chinese antitrust authority. The SAMR may negotiate with the filing parties for revisions and adjustments in several rounds and consult with other governmental agencies, trade associations and related stakeholders through various methods of approach, such as questionnaires, seminars, hearings, etc.
The remedy proposal aims to eliminate or alleviate the SAMR’s competition concerns but not to impede the benefits resulting from the transaction. If the remedy proposal cannot relieve or resolve the related competition issues, the SAMR may block the deal according to the AML. In practice, if remedies cannot be agreed on within the statutory time limit (180 days in total, as there is no “stop the clock” in China), the MOFCOM/SAMR may request the filing parties to withdraw the notification and re-file. Eventually, the authority will publicly announce the decision of restrictive conditions imposed on the transaction.
It should be noted that, the Draft Amendment may bring a “stop the clock” mechanism to the decision process in the future. However, the draft is subject to further review by the government and legislative body.
Parties shall be prohibited from closing a transaction before the remedies have been complied with. There are different standard approaches regarding conditions and timing for structural remedies and behavioural remedies. For behavioural remedies, generally the concentration can be implemented after the decision is published on the SAMR’s website.
For divesture remedies, those of both self-divestiture and trusteeship divestiture could be applied. Self-divestiture is where the divestiture obligor shall find the appropriate buyer itself and sign the sale agreement on the approval of the authority within the time limit stipulated by the authority. Trusteeship divestiture is where the divestiture trustee shall find the appropriate buyer and sign the sale agreement on the approval of the authority within the time limit stipulated by the authority where the divestiture obligor fails to complete the self-divestiture on time. Before the authority decides, the divestiture obligor may not sell the divestiture business to the buyer. The authority may require the divestiture obligor to search for the buyer before the implementation of a concentration and sign the sales agreement with the buyer (which some refer to as the China version of “upfront buyer”). This generally occurs where:
The divestiture obligor must transfer the divestiture business to the buyer within three months from the date of signing the sales agreement, and complete the relevant legal procedures such as ownership transfer.
If remedies are not fully complied with, the authority shall order the parties to suspend the implementation of the concentration. If the condition is more serious, the authority shall order the parties to dispose of the shares or assets within a stipulated period, or order the parties to transfer their business within a stipulated period, and order them to adopt other necessary measures to reinstate the pre-concentration status. A fine of up to CNY500,000 can be imposed.
Notably, the Draft Amendment released on 2 January 2020 has proposed harsher penalties for violations of the AML, that would increase the maximum fine to 10% of sales revenues in the past year.
Formal decisions conditionally permitting or prohibiting a transaction are to be published on the SAMR’s website. The decision mainly cover
Any confidential information, such as the specific market shares of filing parties and related trade secrets are provided as a range or in a redacted version. For those transactions which have unconditional approval, the merger review agency will only publish basic information on the transaction (such as the names of filing parties, and the approval date) on a weekly basis.
In the past twelve months, the SAMR has imposed conditions on six merger cases which involved foreign-to-foreign transactions.
This concentration was initially filed on 15 June 2018 and was cleared with conditions on 5 July 2019. The SAMR imposed behavioural remedies, including a hold-separate remedy. The parties are required to hold their businesses separate in relevant markets for two years and to set up firewalls to prevent exchange of business, employees and competitively sensitive information. In addition, Cargotec promised to supply the relevant products to Chinese customers for five years under the average prices for the last three years without unreasonable limitations.
This concentration was initially filed on 29 December 2018 and was cleared with conditions on 18 September 2019. The SAMR imposed a hold-separate remedy as well as firewalls for three years. In the meanwhile, the parties promised to supply wavelength selector switches to customers on fair, reasonable and non-discriminatory (FRAND) terms.
This concentration was initially filed on 31 August 2018 and was cleared with conditions on 20 December 2019. Aleris agreed to divest its interior and exterior aluminium auto-body sheet business in the European Economic Area. The combined entity must also refrain from supplying cold-rolled plates in China to any competitors that operate in the market for auto-body sheets for a period of ten years unless the parties apply to the SAMR for an early release.
This concentration was initially filed on 29 April 2019 and was cleared with conditions on 28 February 2020. Danaher agreed to divest some business in the relevant markets and provide the assets and IP rights of Project Emily to the buyer.
This concentration was initially filed on 8 August 2019 and was cleared with conditions on 2 April 2020. The SAMR required the parties to supply several key automotive components to Chinese customers without tying or unreasonable limitations and on FRAND terms for five years.
This concentration was initially filed on 24 April 2019 and was cleared with conditions on 16 April 2020. The parties agreed similar supply agreements and FRAND conditions for six years like the Infineon/Cypress case.
In China, ancillary restraints are not explicitly regulated in the AML and the relevant regulations.
Generally, the SAMR may consult with other governmental agencies, trade associations, upstream suppliers, downstream customers and other related third parties through various approaches, such as questionnaires, seminars, hearings, etc, for the merger control review under normal procedure.
Any third parties are also entitled to put forward their concerns, orally or in writing, regarding the notification of undertakings in simplified review procedures and normal review procedures. For simplified notifications, third parties are entitled to provide comments on the concentration of undertakings to the SAMR once the public form is announced on the SAMR’s website. For high-profile and complicated cases applicable to non-simplified procedures, the opinions of economists, consumers, other related undertakings, industrial experts and scholars may weigh against the final decision to some extent.
The SAMR may contact third parties voluntarily as part of its review process, either orally or in writing, by such methods as hearings, telephone calls, written questionnaires, request for relevant documents, etc. In addition, the SAMR generally conducts market tests on remedies provided by the filing parties and seeks comments from other governmental agencies, trade associations, upstream suppliers, downstream customers and other related third parties, especially those who raise concerns about the transaction.
Article 16 of the Measures for Review on Concentrations of Undertakings provides that filing parties, the SAMR and any other related party shall keep confidential any information that includes business secrets obtained in the merger control review. Filing parties may provide a non-confidential redacted version of the notification materials. In practice, the SAMR may consult with other governmental agencies, trade associations or stakeholders and may send out the non-confidential documents to those parties, but not to the public. Additionally, for simplified cases, a public form of notification will be announced on the SAMR’s website, where only basic information of the transaction will be disclosed, such as general information of the filing parties and transactions, reasons to apply for a simplified procedure, and a range of relevant market shares of the filing parties.
When it comes to global merger control filings, especially in high-profile cases, it is common for the authority to co-operate with other jurisdictions. Communication between authorities in different jurisdictions would be conducted on the level of general policy matters, and will not go into the details of competition concerns and remedies unless the filing parties sign a waiver of confidential information of the transaction to the authorities which will be involved in the communication. In other words, the authority shall seek the parties’ permission to share information with other jurisdictions.
Under Article 53 of the AML, the notifying party is entitled to apply to the merger review agency for an administrative reconsideration of the blocking or conditional approval decision adopted by the agency itself. Only when it disagrees with the result of the administrative reconsideration may it file an administrative lawsuit in the court. The court that has jurisdiction over such cases is the Beijing First Intermediate People’s Court.
However, for other types of decisions made by the merger review agency, including penalty decisions imposed on businesses that failed to notify an eligible concentration to the authority, the dissatisfied party may choose between applying for an administrative reconsideration or seeking remedies directly in court.
Under the Administrative Reconsideration Law, the dissatisfied party must apply for an administrative reconsideration within 60 days after first knowing of the decision appealed. If it disagrees with the result of the administrative reconsideration, it may apply for a judicial review within 15 days of receiving the reconsideration decision. However, if it seeks remedies directly in court, it may file the administrative lawsuit within six months of knowing the decision appealed according to the Administrative Litigation Law.
To date, there have been no public reports of any appeals filed either for administrative reconsideration or judicial review. All the concerned parties accepted the merger review authority’s decisions without objection.
The AML does not specifically authorise third parties to appeal a clearance decision made by the merger review authority. Although the Administrative Reconsideration Law and the Administrative Litigation Law specify certain types of cases that can be filed, whether merger review clearance decisions can be appealed by third parties has yet to be tested in practice, as no such appeals have been reported so far.
The Draft Amendment was the first of its kind since the enactment of the AML in 2008. It authorises the SAMR to update the notification threshold in keeping with economic development and the size of specific industries. This move aims to ease the burden on the SAMR, which received a record number of notifications in 2019. The Draft Amendment also proposes to increase the fine for gun-jumping conduct (implementing a transaction before its being approved by the SAMR) to a maximum of 10% of the previous year’s revenue from the current CNY500,000 (equivalent to USD70,000). Furthermore, the Draft Amendment introduces a stop-the-clock mechanism allowing the review period to be suspended in limited circumstances so that in complicated cases the notifying parties do not have to pull and refile before the review period expires.
As regards the SAMR’s implementing regulations, the agency published a draft Interim Provisions on Review on Concentrations of Undertakings to solicit public opinion on 7 January 2020. While mostly a consolidation of six currently existing regulations, the draft Regulation also attempts to make certain revisions. First, it permits a target undertaking to submit evidence to the SAMR that a notification does not qualify for simplified review and should be reviewed under the regular procedure. Second, it specifies that acquisition of sole control over a joint venture by one of its parents is not eligible for simplified review if the combined market share of the joint venture and the acquiring parent exceeds 15%. Third, it allows the SAMR to enlist the resources of provincial competition authorities in merger review and gun-jumping investigations.
It is not clear when the draft amendment to the AML and the draft Interim Regulation will be finalised, and further revisions are likely if public comments are incorporated into the drafts.
In 2019, the SAMR cleared a record total of 465 merger review cases, a slight increase of 3.8% over 2018. Five notifications were approved with restrictive conditions and none were blocked. All but one of the conditionally approved transactions took place between foreign enterprises. In terms of remedies, one case was cleared with a combination of structural and behavioural remedies, and the other four were approved with behavioural remedies alone. The concerned parties were required to run certain businesses separately, continue to supply on FRAND terms, refrain from bundled sales and establish information firewalls. In the first quarter of 2020, the SAMR cleared a record total of 111 merger review cases, a slight increase of 4.7% over the first quarter of 2019. Up to 28 April 2020, three notifications have been approved with conditions and none have been blocked.
From 2008 to 2019, China unconditionally cleared a total of 2,856 merger notifications, conditionally approved 44 and blocked only two. The aggregate transaction value topped CNY45 trillion (approximately USD6.7 trillion).
In 2019, the SAMR continued to step up enforcement against gun jumping. The SAMR issued a record 18 penalty decisions totalling CNY7.3 million in fines, higher than the 15 penalties and total fine of CNY5.8 million in 2018. Considering the proposed penalty increase in the draft amendment to the AML, the SAMR is sending a strong message to private parties that they should comply strictly with the notification requirements. In the first quarter of 2020, the SAMR issued one penalty decision totalling CNY300,000 in fines.
Three trends and concerns were notable in China’s merger control regime in 2019.
First, the SAMR continued to expedite the review process for simplified cases while not relaxing scrutiny over complicated transactions. In 2019, over 75% of the notifications were reviewed under simplified procedure and took an average of less than 20 days from case acceptance to clearance. In comparison, the conditionally cleared cases took an average of almost 400 days from first submission of materials to final approval, with all five cases being pulled and refiled (one was pulled and refiled three times).
Second, the conditionally approved cases all concerned market leaders in highly concentrated sectors. The merging parties either held a greater than 50% market share alone or combined. And requirements for huge investment and technical know-how created high barriers to market entry. It can be seen that the SAMR is particularly concerned with these kinds of market conditions.
Third, the SAMR exhibited a comprehensive approach to gun-jumping enforcement. It fined two entities for the establishment of a joint venture as far back as 2013, it investigated acquisitions of minority stakes as small as 23%, and it increased the amount of fines by imposing at least CNY300,000 (approximately USD40,000) on each party compared with CNY150,000 in most cases before the establishment of the SAMR in 2018.
Please see 3.5 Information Included in a Filing and 3.11 Accelerated Procedure.
The Anti-monopoly Law, which came into force in 2008, laid the foundation for the anti-monopoly review for concentration of business operators – ie, merger control;
The Provisions of the State Council on the Thresholds for Notification of Concentration of Business Operators, which was released by the State Council also in 2008, has established a threshold for the notification of concentration.
Based on the above-mentioned law and administrative regulations, the anti-monopoly enforcement authority under the State Council has formulated several administrative rules on merger control, including:
The anti-monopoly enforcement authority under the State Council has also formulated several standards and guiding opinions, including:
The competent authority for merger control is the State Administration for Market Regulation (SAMR). The Ministry of Commerce (MOFCOM) had served in this role prior to March 2018.
Within SAMR, the Anti-monopoly Bureau is in charge of reviewing and investigating the concentration of business operators, while it is also responsible for investigations into monopoly agreements and abuses of market dominance. The Anti-monopoly Bureau has three divisions dedicated to reviewing the concentration of business operators and one division responsible for the investigation of suspected illegal concentrations of business operators, including so-called "gun-jumping" violations.
In 2019, the SAMR received 503 notified concentration cases, initiated reviews of 462 cases, and completed reviews of 465 cases (including withdrawn cases). Among the 448 cases in which decisions were taken after review, 443 cases were approved without condition (accounting for 98.9%), five cases were approved with restrictive conditions or remedies (accounting for 1.1%), and no cases were prohibited. In the same year, the SAMR investigated 36 suspected gun-jumping cases and imposed administrative penalties in 18 of those cases.
As of 31 December 2019, China has, in total, approved 2,944 concentration cases without conditions, approved 44 cases with remedies, prohibited two cases, and imposed punishments in 52 concentration cases (including 50 gun-jumping cases and another two cases due to the violation of restrictive conditions).
Development of Legislation
Draft amendment to the Anti-monopoly Law (Draft for Public Comment)
The SMAR released the Draft Amendment to the Anti-monopoly Law (Draft for Public Comment) on 2 January 2020. The main proposed amendments concerning merger control are discussed below.
First, recognising the importance of “control” for the purpose of determining whether a transaction constitutes a concentration of business operators, a definition for “control” is proposed to be introduced into the law – the rights or actual conditions through which business operators which, directly or indirectly, individually or jointly, have or may have a decisive impact on the manufacturing and business activities or other significant decisions of other business operator(s) (Paragraph 2 of Article 23). If adopted, we anticipate that supporting regulations and rules might add further details.
Second, it is proposed that the anti-monopoly enforcement authority under the State Council (ie, the SAMR) will be authorised to formulate and revise the notification threshold from time to time based on factors such as economic development level and scale of industry (Paragraph 2 of Article 24). This is a power presently exercised by the State Council. Given that the current threshold has remained unchanged since 2008, we estimate that the SAMR may wish to raise the turnover-based threshold, which may enable the SAMR to focus its limited enforcement resources on cases with competitive concerns. It is also possible for the SAMR to introduce supplementary thresholds by reference to transaction value or market share, etc.
Third, it is proposed to investigate concentration cases that do not meet the notification threshold but otherwise have or may have the effect of eliminating or restricting competition (Paragraph 3 of Article 24). This proposal calls for a higher level of merger control compliance – ie, prior to closing, parties to a transaction need to assess whether that transaction has, or might have, the effect of eliminating or restricting competition. Otherwise, restrictive conditions might be imposed upon that transaction, or the parties may be required to unwind the transaction to return to the pre-concentration status (Article 34). Business operators with relatively high market shares are recommended to keep a close eye on the future development of this proposal.
Fourth, a “stopping the clock” mechanism is proposed – ie, the time taken for the following three circumstances shall not be counted in the review period:
This mechanism is designed to give sufficient time to both the notifying parties and the SAMR to handle the notification and review of complicated cases, and to avoid the need for the re-notifications after withdrawal that frequently occurred in the past. It, however, may also result in it taking a longer time for a case to be cleared.
Fifth, the liabilities of the notifying party/parties breaching the authenticity requirement of submitted notification materials are proposed to be clarified (Article 26). An approval decision could be revoked where there is evidence showing that the materials provided by the notifying party/parties are false or inaccurate (Article 51). Furthermore, a business operator that refuses to provide materials and information or provides false materials and information will be subject to a fine of no more than 1% of its sales in the preceding year, or a fine of up to CNY5 million where there are no sales or it is difficult to calculate such sales in the preceding year (Article 59).
Sixth, it is proposed that the upper limit of the fine be increased from CNY500,000 to 10% of the sales in the preceding year for illegal concentrations including:
The potential cost of violation for business operators with high sales would thus be significantly increased. Such business operators are advised to closely follow the development of this proposed amendment and take extra compliance measures in response.
Interim Provisions on the Review of Concentration of Operators (Draft for Public Comments)
On 7 January 2020, the SAMR released the Interim Provisions for the Review of the Concentration of Business Operators (Draft for Public Comments). This draft mainly aims to consolidate a number of rules and standards previously formulated by MOFCOM and several standards and guiding opinions formulated by the SAMR since March 2018 into a comprehensive set of merger control rules.
Development of Enforcement: Notifiable Transactions
In general, whether a transaction shall be notified to SAMR depends on two factors:
Certain issues to be considered for these two factors have been clarified or reaffirmed in the following cases handled by the SAMR in 2019.
An acquisition of a minority equity stake may be notifiable
An acquisition of a minority equity stake may constitute an acquisition of control. Although this can be inferred from existing regulations and is also evidenced by notified cases in the past, it has been clearly illustrated by the SAMR’s decision to impose penalties in the MBK/Siyanli case. In this case, the acquiring party only obtained 23.53% of the equity in the target company, but the SAMR determined that the acquiring party had acquired control over the target company and the transaction was thus deemed to be a concentration of business operators. The SAMR further determined that this transaction had constituted a gun-jumping violation because MBK had failed to notify the transaction before the change in Siyanli’s shareholding was registered.
The MBK case is also the first case in which an investment fund was punished for gun-jumping violations, and serves as a reminder to the fund industry to pay attention to merger control compliance in contemplating investments.
Notification is not required for transactions under “same control”
Article 22 of the Anti-monopoly Law provides two circumstances under which a notification is not required:
However, it is not clear whether a notification is required for transactions in which the voting shares hold are less than 50% but the parties are otherwise under “same control”.
This issue has been clarified by three withdrawn notifications in 2019. According to the announcements of three listed companies – Huafon Spandex, Huilong, and Xinjiang Tianye, the SAMR approved their applications to withdraw their notifications for their respective proposed equity acquisitions under “same control”. As stated in Xinjiang Tianye’s announcement, the concerned acquisition “is an asset restructuring under the same control and there will be no change in the actual controller of the company due to the said acquisition so, as communicated with the Anti-monopoly Bureau, this acquisition may not constitute a concentration of business operators under the Anti-monopoly Law and relevant rules.”
“Parallel acquisitions” are treated as a single concentration
In other jurisdictions, such as the EU, parallel acquisitions of control of undertakings B and C by undertaking A in parallel from separate sellers would be treated as a single concentration on the condition that A is not obliged to buy either and neither seller is obliged to sell, unless both transactions proceed.
In December 2019, the SAMR imposed punishments on such “parallel acquisitions” whereby the Liaoning Port Group acquired the equities of the Dalian Port Group and the Yingkou Port Group, respectively. Liaoning Port Group acquired the two target companies through two separate agreements (signed on the same day) and from different sellers. Being formally independent of each other, these two transactions were nevertheless treated by the SAMR as a single concentration. On that basis, though the acquiring party, as a newly established company, had no turnover in the preceding fiscal year, the SAMR was of the view that the concentration in question had met the notification threshold considering the high turnover of the two target companies. Based on public information, it is not clear whether the SAMR, in treating the two acquisitions as a single concentration, adopted the same standard as, or one similar to, that in other jurisdictions such as the EU. We will follow-up on this case and share our findings accordingly.
Meaning of the “preceding fiscal year”
The precise definition of turnover in the “preceding fiscal year” is crucially important in determining whether a concentration is notifiable. However, current laws and regulations have not clarified the time point for the determination of the preceding fiscal year.
In practice, voluntarily notified cases usually use the turnovers of the fiscal year preceding the “execution date of the concentration agreement” – eg, the signature date of a share purchase agreement. However, the SAMR has more often counted the turnovers of the fiscal year preceding the date of implementation/closing of the concentration (eg, the date of registration of the change of shareholding) in gun-jumping cases. This practice of the SAMR continued in 2019. In all three cases where the execution date of the concentration agreement was different from the date of the closing of the concentration, the SAMR counted the turnovers of the fiscal year preceding the date of the closing in support of its determination that the notification threshold had been met.
Development of Enforcement: Review Process
Review of simple cases
The “simple case” system was officially introduced in 2014. If qualified as a simple case, the documentary requirements will be less, and more importantly, the review period is much shorter. In 2019, most simple cases were approved within the 30-day period of preliminary review. The average period from initiation of review to clearance was 16 days in 2019, which is basically the same as in 2018 but significantly shorter than the 23-day average in 2017.
It should be noted that there is no statutory time limit for the SAMR to initiate its review after having received the notification documents. In our experience, it takes two to four weeks for the SAMR to initiate the review in most simple cases.
The SAMR will publish a summary of each simple case in a prescribed format on its official website in order to solicit public comments for ten days. During the publicity period, any third party may object to the treatment of the case as a simple case. An increasing number of enterprises have used this channel to make comments on, or objections to, concentrations by or among their competitors or upstream/downstream enterprises.
Review of non-simple cases
Compared to simple cases, the notification of non-simple cases requires more documentation and a longer review period. In our experience, it normally takes four to six weeks for the SAMR to initiate the review of a non-simple case. The period from initiation of the review to clearance significantly varies. It may be as short as one or two months, but can also be more than one year in complicated cases – eg, the average review period for the five cases eventually approved with remedies in 2019 (see below) was 353 days. This review is time-consuming because, in addition to the fact that non-simple cases would more likely give rise to competitive concerns, the SAMR needs to collect opinions from relevant government authorities, industry associations, peer-competitors, and upstream and downstream enterprises during the review. In large mergers, it is particularly important to get a green light from the aforesaid stakeholders.
Conversion from a simple case to a non-simple case
If the SAMR finds during the course of its review, either by itself or upon receiving an objection from a third party, that a concentration does not qualify as a simple case, it shall revoke its determination that the case is a simple one and require the notifying party/parties to re-notify the case as a non-simple one. The latest example is Novelis’ acquisition of Aleris, which was approved with remedies in December 2019. Based on publicly available information, the transaction had been notified as a simple case in late August 2018 on the basis of definitions of broader relevant markets. The SAMR received objections from third parties during the publicity period, and required Novelis to re-notify the transaction as a non-simple one. Novelis did so, in a process in which it redefined two narrower relevant markets.
Development of Enforcement: Competitive Assessment and Remedies
In 2019, the SAMR approved five concentration cases with remedies, of these four cases involved only foreign enterprises while one case involved a foreign enterprise as one party and a domestic enterprise as the other. From the SAMR’s decisions in these five cases, it is possible to better understand how the SAMR will assess the competitive effects of a particular transaction and what remedies will be taken to address the identified competitive concerns.
In four cases including Cargotec/TTS, II-VI/Finisar, Garden/DSM and Novelis/Aleris, there existed horizontal overlap between the parties to the concentration. For horizontal mergers, the SAMR normally assesses whether the concentration will have unilateral effects or co-ordination effects by considering factors including:
For example, in Novelis/Aleris, the SAMR found that the concentration would likely eliminate or restrict the market competition mainly on the grounds that:
In many jurisdictions, divesture is the typical remedy adopted to address the competitive concerns arising in horizontal mergers. In contrast, the SAMR only required divesture in one of the above four cases (ie, Novelis/Aleris) as did its US and EU counterparts. As to the other three cases, the SAMR imposed “hold separate” requirements together with ring-fencing remedies. In addition, behavioural remedies were imposed in all the four cases. For example, the parties in the Cargotec/TTS case were required not to increase the price of each of three relevant products in the Chinese market – ie, the price should not be higher than the average price in the most recent three calendar years.
The KLA-Tencor/Orbotech case involved both vertical and neighbouring relations, while the Garden/ DSM involved vertical relations in additional to horizontal overlap (see above).
With regard to vertical relations, the SAMR is mainly concerned with possible foreclosure effects. In the former case, the SAMR considered that KLA-Tencor/Orbotech might use its dominance in the upstream market for process control equipment to foreclose Orbotech’s competitors in the downstream deposition and etching equipment market by way of refusal to supply, discrimination, etc. In the latter case, the two parties’ combined market shares in the two downstream markets were both over 50% and the market share of one of the two parties in the upstream market was over 50%. The SAMR considered that the parties might pursue foreclosure in respect of both raw materials and customers and thus eliminate or restrict the competition in both upstream and downstream markets. Furthermore, the SAMR had concerns that KLA-Tencor might obtain competitively sensitive information about competitors of Orbotech and provide that information to Orbotech.
In order to address the above concerns, the SAMR imposed behavioural conditions on both cases – ie, the party manufacturing the upstream product shall supply that product to all manufacturers of downstream products worldwide or within China on the basis of the fair, reasonable and non-discriminatory (FRAND) principle. In addition, ring-fencing remedies were imposed in KLA-Tencor/Orbotech.
As to the neighbouring relations involved in KLA-Tencor/Orbotech (the fact that process control equipment and deposition and etching equipment share the same class of customers), the SAMR imposed additional behavioural remedies – ie, without justifiable reasons, the two products shall not be tied or bundled in sale in the Chinese market.
It can be seen from the above that the Chinese Anti-monopoly authority, although following international practice, has developed its own style in terms of competitive assessment and choice of remedies. In particular, it prefers “hold separate” instead of divesture and frequently imposes behavioural conditions like maintenance of supply.
Development of Enforcement: Punishment of Gun-Jumping Violations
The number of punished cases hits a new record
As of the end of 2019, MOFCOM and the SAMR had released punishment decisions in relation to 50 gun-jumping cases. Among them, there were 15 punished cases in 2018, with an increase of 150% over 2017, and the number further increased 20% to 18 punished cases in 2019, including 14 equity acquisition cases and four cases involving the establishment of joint ventures).
The SAMR punishes the first “prior to clearance” gun-jumping case
Previously, all punished gun-jumping cases were transactions the closing of which had taken place without, or prior to, notification. In 2019, the SAMR punished the first “gun-jumping” case where a notification of the underlying transaction had been made but the parties closed the transaction prior to the clearance by the SAMR. In this case, the notification was made by the acquiring party very soon after the share purchase agreement was signed, and was officially accepted by the SAMR on 9 April 2019. The publicity period was scheduled to expire on 18 April 2019. However, the shares were transferred to the acquiring party on 17 April 2019. The SAMR did not clear the notified case, but initiated an investigation into the gun-jumping violation on 3 June 2019 and issued the penalty decision on 13 December 2019.
Nearly half of the punished cases involve listed companies and SOEs respectively
In 2019, there were at least seven punished cases involving listed companies, accounting for nearly 40% of the total. Among them, five cases involved A-share (domestic) listed companies, respectively acting as the acquiring party in three cases and the acquired party in two cases. Listed companies are subject to strict information disclosure requirements, so their gun-jumping violations are more likely to be reported by third parties or otherwise discovered by the SAMR. The consequences of gun-jumping violations are usually more severe for listed companies. In addition to the fines imposed by the SAMR, the market value of the company and/or subsequent operations in the capital market may be adversely impacted. Therefore, the parties in an acquisition involving listed companies should pay particular attention to merger control compliance.
In 2019, enterprises with state-owned investment backgrounds were punished in at least seven cases. It is worth noting that, besides market-based equity acquisitions and establishment of joint ventures, gun-jumping transfers of state-owned equity without consideration have also been punished.
More violation cases seem to be being discovered by the SAMR itself
Among 18 punished cases in 2019, 13 cases may have been discovered by the SAMR itself, either from news report or other public information, or during its review of subsequent notified transactions.
Among 18 punished cases in 2019, the longest time from the initiation of investigation to the penalty decision (investigation time) was 418 days, and the shortest was 94 days, with the average being 234 days. The average investigation time in 2019 has been shortened by nearly 10% compared to 2018. Nevertheless, it still far exceeded the review period of normally notified cases, which implies that it would take much more time, energy, and/or money to deal with investigations of gun-jumping violations.
For all 50 gun-jumping cases, the SAMR/MOFCOM has only imposed fines without taking other measures, such as the prohibition of concentration or the disposal of acquired equity. Within the current statutory upper limit for fines (ie, CNY500,000), the SAMR has imposed higher fines in 2019. From 2014 to 2018, 13 out of the 32 punished cases had a fine of CNY300,000 or more imposed, accounting for about 40%, while in 2019, 17 out of the 18 cases involved a fine of CNY300,000 or more, accounting for 94%.
Special Arrangements Responding to COVID-19
The outbreak of COVID-19 since January 2020 has imposed new challenges on the SAMR’s merger control work. The SAMR released an announcement on 5 February 2020, introducing off-site review with the aim of preventing the spread of the epidemic. In particular, notifying parties may send electronic copies of notification materials as well as replies to the SAMR’s request for further information (RFI). The SAMR may also send notices and decisions to the notifying parties via email or fax.
On 4 April 2020, the SAMR released a new announcement that the off-site review shall remain applicable and that a green channel has been established to accelerate the review process for transactions supporting the prevention and control of the epidemic and the resumption of work and production. Concentration cases that can enjoy accelerated review via this green channel include cases:
To date, it seems that the efficiency of the SAMR’s merger control work has not been materially impacted by the epidemic. From February to April, the SAMR approved 115 transactions without condition, and three transactions with remedies. The number of reviewed cases has not significantly dropped compared to the corresponding period of the last year, and the average period for reviewing simple cases seems to have even been shortened, as the average length in the first quarter of 2020 was 12.8 days only (as opposed to 13.4 days in the fourth quarter of 2019).
The SAMR is expected to carry forward the amendments to the Anti-monopoly Law. Business operators should pay close attention to the proposed major amendments, including adjustment of notification thresholds, investigations of concentrations that do not reach the notification thresholds, enhanced obligations of the notifying parties to co-operate with SAMR’s review, and the higher costs of gun-jumping violations, etc. As of now, it seems that COVID-19 has not caused significant adverse effects on merger control notification and review. It remains to be seen whether certain temporary practices (eg, the off-site notification and the green channel) implemented by the SAMR during the epidemic period will be applicable in the long-term.
Among cross-border M&A in 2019, the case of Yonghui’s acquisition of Zhongbai attracted wide attention. In this case, Yonghui was required by the National Development and Reform Commission (NDRC) to go through national security review for foreign investment just after Yonghui had announced its receipt of merger control clearance from the SAMR, which eventually led Yonghui to give up the transaction. This case indicates that cross-border M&A in relation to the Chinese market may face all-around supervision and regulation in China. The interaction between the national security review and the merger control review will be an important issue to focus on in the future.
As China is the second largest economy in the world, it is crucial for most major cross-border M&A to be cleared in China. The parties to such transactions are advised to formulate a strategy for merger control review at an early stage of the transaction, including whether the transaction is notifiable and whether and when the clearance can be obtained in China (and other jurisdictions). Furthermore, the prospect of merger control review should be taken into account when closing conditions, closing deadlines, break-up fees, and other terms in the transaction documents are designed. Given that merger control is regulated under PRC law, it is crucial that experienced PRC lawyers are retained at an early stage to advise on the transaction or the handling of violation investigations, as well as for the follow-up implementation of the formulated strategies.