Ministry publishes Anti-monopoly Law guidelines

“Mofcom seems to give a lot of weight to the review of concentration below thresholds,” he says.

This could be interpreted as an indication that Mofcom intends to review many below-threshold operations, or simply as a response to previous concerns over the Ministry's scrutiny of such deals.

More clarity on relevant market, and more burdens

Earlier in January, Mofcom issued three documents related to merger filings: the Working Guidelines on Anti-monopoly Reviews for Concentrations of Business Operators (Working Guidelines), Guiding Opinion on Reporting of Concentrations of Business Operators (Opinion on Reporting) and Guiding Opinion on Documents and Information Required for Reporting of Concentrations of Business Operators (Opinion on Documents). The Flowchart for Anti-monopoly Reviews for Concentrations of Business Operators was also published. (See pages 75, 78, 82 and 84 for full translations.)

The Opinion on Reporting helps to clarify which party must file a merger notification, and also provides procedural steps for those wanting to engage in pre-filing consultation with Mofcom.

Article 5 of the Opinion on Documents lays out factors which should be addressed in filings when the competitive-effect of concentrations is explained, and references several matters not mentioned in the 2007 Guidelines on Anti-monopoly Filings for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (see full translation in CLP April 2007).

“[Article 5 is] certainly more expansive in terms of setting out factors,” says Gerry O'Brien, senior associate of JSM in Hong Kong. While it provides more clarity on Mofcom's expectations for filings, O'Brien notes that it may also broaden the scope of filing requirements and render them more onerous – companies making an acquisition must theoretically submit a Chinese copy of due diligence reports, and information on all their affiliates involved in the transaction.

“In practice, we must hope that all [the] documents or information will not be requested, otherwise it could require a lot of admin work and even possibly have a serious impact on the timing of a deal,” says Renard.

Gaps in the guidance

The three documents give detailed technical requirements for merger filings, and also list the information that must be submitted. Article 13 of the Opinion on Documents demands the submission of detailed company documents, such as internal analyses, feasibility studies and due-diligence reports. If interpreted broadly, this would mean a requirement similar to that of the onerous Item 4(c) of the Hart-Scott-Rodino Antitrust Improvements Act (1976) in the US.

“The information-production burden imposed on filing parties could be very significant, particularly as it may not be constrained by the application of principles like legal professional privilege,” says O'Brien.

Although they provide more help for filing parties, the documents do not clearly specify a filing deadline. Lawyers can only point to the system which operated before the establishment of the AML merger control regime. Under that system, certain filings had to be made either before public announcement of an acquisition plan, or at the same time as a pre-merger filing in the target's home country.

For some time, lawyers have disagreed over how Mofcom will measure its 30-day notification acceptance period. The Opinion on Reporting has answered this question: Article 5 says that the Ministry will issue an information registration form after receiving notification materials; however, it goes on to state explicitly that the issuance of this form does not indicate that the documents comply with requirements.