New merger-control regulations create uncertainty

The previous draft of the Measures for the Reporting of Concentrations of Business Operators defined acquisition of control as occurring in situations such as where 50% or more of the voting shares or assets of an entity were acquired; or where a party obtained rights to appoint directors or key executives of a target, among others. The uncertainty created by the removal of the definition means companies may need to consult with Mofcom before going ahead with many deals, even those that concern only minority share acquisitions.

The finalised Measures for the Reporting of Concentrations of Business Operators are also missing guidance on joint ventures (including if and when joint ventures constitute concentrations under the PRC Anti-monopoly Law).

“Without formal rules limiting the kind of transactions covered by merger review, Mofcom may be tempted to argue that acquisitions of minority shareholdings and limited control rights, as well as the creation of joint ventures of a more limited nature, have to be notified where the thresholds are met,” Linklaters' antitrust team wrote in a recent client alert.

The move also gives Mofcom more discretion to investigate transactions in which it is particularly interested.