New guidelines and consultation papers issued for merger control applications

2. Guiding Opinion on Reporting of Concentrations of Business Operators: sets out the basic principles in preparing and filing merger control applications;

3. Working Guidelines on Anti-monopoly Reviews for Concentrations of Business Operators: sets out the application documents to be filed, and the administrative procedures and timelines in Mofcom's handling of merger control applications; and

4. Flowchart for Anti-monopoly Reviews for Concentrations of Business Operators: shows each of the steps and the authority in charge of the merger control application.

On January 7, 19 and 20 2009 and February 6 2009, Mofcom issued the following consultation papers:

(i) Guidelines on the Definition of Relevant Market: provides guidance on defining relevant market for relevant product and geographic markets;

(ii) Tentative Measures for the Investigation and Handling of Concentrations of Business Operators that have not been Reported in accordance with the Law (Draft): sets out the procedures for Mofcom's investigating and handling of concentrations which have met the notification thresholds but no merger control application has been submitted;

(iii) Tentative Measures for the Collection of Evidence for Suspected Monopolies of Concentrations of Business Operators that have not reached the Reporting Threshold (Draft): sets out the procedures for Mofcom's collecting evidence for concentrations which have not met the notification thresholds but eliminates/restricts or may eliminate/restrict competition;

(iv) Tentative Measures for the Investigation and Handling of Concentration of Business Operators that have not reached the Reporting Threshold (Draft): sets out the procedures for Mofcom's investigating and handling concentrations of business operators which have not met the notification thresholds but eliminate/restrict or may eliminate/restrict competition;

(v) Tentative Measures on Reviews for Concentrations of Business Operators (Draft for Comments): clarifies certain important principles, including “control”, “joint control”, “business turnover” and “calculation of business turnover”; and

(vi) Tentative Measures for the Review of Concentrations of Business Operators (Draft for Comments): sets out the procedures for Mofcom's handling of merger control application, including withdrawal of application, hearings and imposing restrictive undertakings on operators.

Main concerns

Uncertain initial review time limit: There is no statutory time limit stated in the AML for Mofcom's conducting of its initial review and/or requesting supplementary documents or information before its formal acceptance of merger control applications. With the new procedure in place whereby all applications must be filed through a centralised registration centre, there is greater uncertainty as to when Mofcom may complete its initial review and formally accept the application.

Lengthened preparatory period and increased cost: Under the new guidelines, business operators must submit a considerable number of supporting documents to Mofcom, such as feasibility study reports, due diligence reports, industry development reports, and future forecast report after concentration. It is uncertain whether Mofcom will require all or only part of the aforesaid documents.

In addition, Mofcom requires rather exhaustive information related to market concentration, entry of market, current status of industry development, impact on the structure of competition in the market, and so on. Again, it is uncertain whether Mofcom will require all of the said information.

It is, however, certain that the operators have to spend more time, money and human resources in preparing the substantially increased amount of information required.

Limitation on applicant: Under the new guidelines, for any concentration resulting from a merger, the application shall be filed by all of the business operators involved in the merger. For any other types of concentration, the application shall be filed by the business operator who will gain the right of control or decisive influence after the concentration. Practically speaking, the business operator who will gain control over a business may have limited access to the information required for preparing the application and it is unfair for such operator to bear all responsibilities and liabilities under the AML.

Conclusion

Despite the uncertainties and concerns faced by practitioners, the new guidelines provide clearer direction for the documents to be prepared by the applicant and extent of information to be included, and are generally welcomed by practitioners. The consultation papers have taken into account initial comments, which has demonstrated Mofcom's open attitude.