Guiding Opinion on Documents and Information Required for Reporting of Concentrations of Business Operators

(Published by the Anti-monopoly Bureau of the Ministry of Commerce on January 7 2009.)

With a view to facilitating the reporting of concentrations by business operators, we prescribe, pursuant to Article 23 of the PRC Anti-monopoly Law, the following reporting documents and information for reference by business operators. Reporting parties may refer to the reporting form (attached) when preparing their reporting documents and materials.

Article 1: The cover letter shall state the names, domiciles and scopes of business of the business operators involved in the concentration, the nature and background of the concentration, the anticipated date of the formation of the concentration, the market that the concentration will affect, the commercial considerations of the concentration, the economic rationale, and the reporting criteria that the concentration satisfies.

The contents of the cover letter shall be concise, and it shall be signed by the reporting party or the appointed agent. The cover letter shall be accompanied by an abstract that does not contain any trade secrets or state secrets.

Article 2: The basic particulars of each of the parties to the concentration, including but not limited to their enterprise names, places of registration, scopes of business, corporate form, contact persons (name, title and contact information), business turnover during the most recent financial year (including global turnover and turnover in China), company size and position in the industry, and an account of their establishment and material changes.

The reporting party for the concentration shall provide proof of his/her identity or its proof of registration. If the reporting party is an overseas enterprise or overseas natural person, it/he/she shall also submit the notarisation and certification documents issued by the relevant local authorities.

If the reporting party appoints an agent to submit the report on its/his/her behalf, it/he/she shall issue the agent a power of attorney and provide its/his/her contact information and the address for service of documents. Overseas reporting parties shall appoint an agent or person for receipt of documents that is domiciled in China, and provide its/his/her contact information.

Article 3: A list of the enterprises and natural persons that have an affiliated relationship with the parties to the concentration and a brief account thereof. An organisational chart or other chart may be used to illustrate affiliation such as the equity structure or de facto control between the aforementioned enterprises and persons.

A more detailed account shall be provided for those companies that engage in business related to that of the concentration that is being reported. In addition to giving details of the affiliated persons with reference to Article 2 hereof, a detailed account of their products (services) shall also be provided.

The business licences (and approval certificates in the case of foreign-invested enterprises) of companies established in China (including foreign-invested enterprises and their investee enterprises in China), resident representative offices, branches and other entities registered in China shall be provided.

Article 4: Overview of the concentration transaction, including the background leading to the concentration transaction; the nature of the concentration and method by which it is effected (e.g. asset acquisition, equity acquisition, merger, establishment of a joint venture); the subject matter of the transaction and transaction amount (if a valuation was carried out, or approval was given by the relevant authorities, the corresponding documents shall be provided) and the anticipated date of completion; the control and affiliated relationships among the relevant companies after completion of the concentration (if necessary, the company structure may be illustrated through the use of charts); the industry and the main products on which the concentration has a bearing (including its production capacity, output, sales volume, prices, costs, etc.); the motivation and objectives of the concentration, or an analysis of its economic rationale; and the market development prospects and development plan after the completion of the concentration.

Article 5: An account of the effect of the concentration on competition in the relevant market, including but not limited to following:

(1) Definition of the relevant market and the grounds therefor, including definition of the product market and the geographical market. When defining the relevant product market, the analysis may be conducted from the perspective of the features, price and purpose of the products themselves, consumer demand and preferences, supply and demand substitution, etc. When defining the relevant geographical market, the analysis may be conducted from the perspective of the industry specifics, nature of the products, transport, customs duties, insurance, consumption habits, etc. In defining the relevant market, the relevant data shall be provided and the pertinent economic analysis carried out when necessary.

(2) Basic particulars of the relevant market, including but not limited to an analysis of the overall size of the market and its current state of development; the main market competitors, their market share and contact information; degree of market concentration; details of the import and export of products in the relevant market, and their customs duties; transportation costs; and price levels in various countries. The source of the data, basis for the calculation, and the supporting documentation, etc. shall also be provided.

(3) Effect of the concentration on the market structure, including but not limited to an analysis of the business turnover and market share of each of the parties to the concentration during the most recent two years, and the mode of operation of each of the parties to the concentration. The source of the data, basis for the calculation, and the supporting documentation, etc. shall also be provided.

(4) The major upstream and downstream enterprises in the relevant market, their contact persons and contact information, the major enterprises that have upstream and downstream transactions with the parties to the concentration and the basic particulars of the transactions with upstream and downstream enterprises.

(5) The supply structure and demand structure of the relevant market.

Article 6: A market entry analysis, including but not limited to the following:

(1) actual, legal and other impediments that hamper entry into the relevant market;

(2) restrictions arising due to intellectual property rights, and an account of the parties to the concentration as intellectual property licensors and licensees in the relevant market;

(3) importance of the economies of scale of the relevant products, and the number and size of the competitors in the relevant market;

(4) potential market competition and possible market entry, and the possibility and degree of difficulty of instant entry into the relevant market for effective competition; and

(5) a list of the major entries into and withdrawals from the relevant market in recent years, and, if possible, such detailed information as the names and contact information of the enterprises that have entered or withdrawn from the market shall be submitted.

Article 7: Details of the horizontal or vertical co-operation agreements between business operators in the relevant market, e.g. whether there are agreements concerning research and development, assignment of patent use right, joint production, distribution, long-term supply and information exchange. If possible, further information on the aforementioned agreements shall be submitted.

Article 8: The effect of the concentration on the market structure, development of the industry, competitors, upstream and downstream business operators, consumers, technological progress, economic development and the public interest.

Article 9: The efficiency that may result from the concentration and the pertinent supporting documentation. The manner in which the efficiency is to arise, the time the same will arise, the method of quantification, the extent of benefit to consumers, and whether such efficiency can be realised by means other than the concentration shall be analysed.

Article 10: An account of the size and competitiveness of the parties to the concentration in markets other than the relevant market.

Article 11: The concentration agreement, including all of the transaction documents relating to the concentration and the supplementary documents and annexes thereto. If the concentration agreement is in a foreign language, a Chinese translation thereof or a Chinese abstract of the major provisions thereof shall also be submitted.

Article 12: The audited financial statements of each of the parties to the concentration for the preceding financial year. If the financial statements are in a foreign language, a Chinese translation thereof or a Chinese abstract of the major parts thereof shall also be submitted.

Article 13: Analyses and report documents prepared internally by each of the parties to the concentration or by third parties that would be of assistance in assessing the concentration, such as the feasibility study on the concentration transaction, due diligence reports, industry development research report, concentration planning report, as well as post-transaction prospects and development forecast report. The names of the persons who prepared the aforementioned reports and the dates thereof shall also be provided.

Article 14: The possible effect on the business operators and the relevant market if the concentration is prohibited.

Article 15: Information on the industry association of the relevant market, including whether such an association exists, and the name, person in charge and contact information of the association. Information on the experts in the relevant market may also be provided.

Article 16: Opinions of relevant parties on the concentration, such as the opinions of the local government and competent authorities, the reaction to the concentration from various sectors of the public and a forecast of the social impact of the concentration. The opinions of the relevant parties may be collated and the relevant documents and information included.

Article 17: Details of the reporting and review of the concentration in other jurisdictions.

Article 18: Other circumstances that need to be explained to the competent authorities, including issues such as bankrupt enterprises, state security, industrial policy, state-owned assets, the functions of other authorities and well-known trademarks on which the concentration will have a bearing. The aforementioned issues shall be specially addressed.

Article 19: A declaration as to the truthfulness of the reporting documents and information and/or the accuracy of the source thereof signed by each of the parties to the concentration and/or their authorised agents.