Progressing the notion of concentration under the Anti-monopoly Law

Until now, little has been heard from regulatory organisations related to the enforcement of the Anti-monopoly law. These include the Ministry of Commerce (Mofcom), the State Administration for Industry and Commerce (SAIC) and the National Development and Reform Commission (NDRC). However, there appears to be a consensus among them for a need to focus on the legislation progress, and to promulgate guiding opinions, guidelines, working guidelines and regulation and administrative procedures in an expedited fashion. Among these three organisations, it seems Mofcom is moving the most quickly..

Since January 1, Mofcom has published 10 draft documents relating to the AML. These documents will prove to be increasingly important, and include:

• Guiding Opinion on Documents and Information Required for Reporting of Concentrations of Business Operators (关于经营者集中申报文件资料的指导意见);

• Guiding Opinion on Reporting of Concentrations of Business Operators (关于经营者集中申报的指导意见);

• Working Guidelines on Anti-monopoly Reviews for Concentrations of Business Operators (经营者集中反垄断审查办事指南);

• Flowchart for Anti-monopoly Reviews for Concentrations of Business Operators (经营者集中反垄断审查流程图);

• Guidelines on the Definition of Relevant Market (关于相关市场界定的指南);

• Tentative Measures for the Investigation and Handling of Concentrations of Business Operators that have not been Reported in accordance with the Law (Draft);

• Tentative Measures for the Collection of Evidence for Suspected Monopolies of Concentrations of Business Operators that have not reached the Reporting Threshold (Draft);

• Tentative Measures for the Investigation and Handling of Concentration of Business Operators that have not reached the Reporting Threshold (Draft);

• Tentative Measures on Reviews for Concentrations of Business Operators (Draft for Comments); and

• Tentative Measures for the Review of Concentrations of Business Operator (Draft for Comments)

Besides these documents, Mofcom also published a Guidelines on the Definition of Relevant Market (关于相关市场界定的指南) on January 31 as a means of economic analysis for the AML.

Compared with Mofcom, SAIC and NDRC appear quite quiet. However, they are also preoccupied by the legislation progress concerning the AML, especially in the field of abuse of dominance, monopoly agreement (cartel) and administrative monopoly. It has been heard that both regulatory organisations will publish the related regulations soon, including substantial and procedural regulations.

Chinese antitrust lawyers hail such legislation in general, and hope such documents will resolve the difficulties in the enforcement of the Chinese AML.

Firstly, the regulations provide Chinese lawyers and business operators with documents detailing the requirement for the concentration notification.

Article 23 of the AML states:

When making a concentration declaration to the Anti-monopoly Law Enforcement Agency under the State Council, the business operators shall submit the following documents and materials: 1. The Declaration Form; 2. Explanations of the concentration effects on the relevant market competition situations; 3. Concentration agreements; 4. The financial and accounting reports for the previous fiscal year of the business operators involved in the concentration, which should be audited by an accounting firm; and 5. Other documents and materials required by the Anti-monopoly Law Enforcement Agency under the State Council. The declaration form shall contain the names of the business operators involved in the concentration, their domiciles, business scopes, the date on which the concentration is to be implemented, and other matters prescribed by the Anti-monopoly Law Enforcement Agency under the State Council.

In practice, such a simple and abstract provision is far from useful. For instance, how to make explanations concerning the concentration effects on the relevant market competition situations could be understood differently by different lawyers. When notifying a concentration to Mofcom, Chinese lawyers predominantly complain it is hard to prepare a related explanation efficiently.

Secondly, it is easy for officials to refuse to accept the relevant documents. Now, the Guiding Opinion on Reporting of Concentrations of Business Operators regulates such explanation in detail. This includes an overview of the concentration transaction, the definition of the relevant market, the market share of the business operators and their control to such market, the main competitors and their market shares, and the degree of market concentration.

Furthermore, the regulations correct the former legal provision in fact. For example, when calculating the notification threshold for concentration, the regulation from the State Council simply states that it depends on the output amount of the total parties of the concentration. Such a provision ignores the market power of affiliated enterprises to the parties of concentration. The provisional review regulation for the Notification of Concentrations of Business Operators clearly regulates the calculation of output, stating it will take the output of the affiliated enterprises into account.

Lastly, new regulations regulate hearing procedure, evidence collection and procedure, and investigation procedure. Such procedures will ensure that the enforcement of the AML be more transparent and fair.

Overall the advent of the new regulations and procedures should be held in high regard among Chinese anti-monopoly lawyers and is a positive step forward for the AML.