Provisions on the Attachment of Restrictive Conditions to Concentrations of Business Operators (Trial Implementation)

(Issued by the Ministry of Commerce on December 4 2014 and effective as of January 5 2015.)

Order of Mofcom [2014] No.6

Part One: General Provisions

Article 1: These Provisions have been formulated pursuant to the PRC Anti-monopoly Law in order to regulate the law enforcement work related to the attachment of restrictive conditions to concentrations of business operators, reduce the adverse impact of concentrations on competition and safeguard the lawful rights and interests of relevant business operators.

Article 2: With respect to a concentration of business operators that is not prohibited, the Ministry of Commerce may attach restrictive conditions that reduce the adverse impact of the concentration on competition.

Article 3: Restrictive conditions may include the following types:

(1) structural conditions, such as those that divest tangible assets, intangible assets, such as intellectual property, or related rights and interests;

(2) behavioural conditions, such as those that open up access to a network, platform or other such infrastructure, license key technologies (including patents, proprietary technologies or other intellectual property), terminate exclusive agreements, etc.; and

(3) comprehensive conditions that combine structural conditions and behavioural conditions.

Article 4: For the purposes of these Provisions, the term “divestiture” means the act whereby the divestiture obligor sells the divestment business to a buyer.

The term “divestiture obligor” means the business operator that, pursuant to the review decision, is required to sell the divestment business.

The term “divestment business” means all the factors required by a business operator to compete effectively in the relevant market, including rights and interests such as the tangible assets, intangible assets, equity, key personnel as well as customer agreements or supply agreements of the divestiture obligor. The divestment business may be a subsidiary, branch or business office of a business operator involved in a concentration.

The term “monitoring trustee” means a natural person, legal person or other organisation appointed by the filer and approved by the Ministry of Commerce that is responsible for monitoring the divestiture at the default divestiture period.

The term “divestiture trustee” means a natural person, legal person or other organisation appointed by the filer and approved by the Ministry of Commerce that is responsible for selling the divestment business at the trustee divestiture period.

Part Two: Determination of Restrictive Conditions

Article 5: The Ministry of Commerce shall, in a timely manner, render its determination as to whether a concentration has or could have the effect of eliminating or restricting competition and give its reasons therefor, and the filer may, based thereon, propose restrictive conditions (the Restriction Proposal).

Article 6: If a filer puts forward a Restriction Proposal in respect of the Ministry of Commerce's determination of the effect of eliminating or restricting competition, it shall submit its final plan within 20 days before the deadline for the further review stage.

If the filer fails to put forward a Restriction Proposal by the specified time limit, or the Restriction Proposal put forward by it is insufficient to reduce the adverse impact of the concentration on competition, the Ministry of Commerce shall prohibit the concentration.

A filer may also put forward a Restriction Proposal before the Ministry of Commerce renders its determination as to whether the concentration has or could have the effect of eliminating or restricting competition.

Article 7: If a filer puts forward a Restriction Proposal before the specified time limit, the Ministry of Commerce shall hold consultations with the filer, evaluate the effectiveness, practicability and timeliness of the Restriction Proposal and notify the filer of the outcome of the evaluation.

If there is a risk that the initial Restriction Proposal plan put forward by the filer is not implementable, the Ministry of Commerce may, in its review decision, require the filer to propose a backup plan based on the initial plan. The conditions of the backup plan shall be stricter than those of the initial plan, and may contain different core assets, including tangible assets, intangible assets, such as intellectual property, or related rights and interests.

Article 8: When evaluating a Restriction Proposal, the Ministry of Commerce may seek the opinions of relevant government departments, industry associations, business operators and consumers by the following means:

(1) distribution of a questionnaire;

(2) holding of hearings;

(3) arranging for relevant experts to have a discussion thereon; and

(4) other means.

Article 9: The Ministry of Commerce shall publicly announce its review decision on the attachment of restrictive conditions.

The Ministry of Commerce shall expressly specify in its review decision whether it requires the filer to appoint a trustee and the applicable procedure.

Part Three: Implementation of Restrictive Conditions

Article 10: If the attached restrictive condition is divestiture, default divestiture or trustee divestiture may be opted for.

The term “default divestiture” means the act whereby the divestiture obligor finds a suitable buyer, executes a sales agreement and the same is examined and approved by the Ministry of Commerce by the time limit specified in the review decision.

The term “trustee divestiture” means, where the divestiture obligor fails to punctually complete the default divestiture, the act whereby the divestiture trustee searches for a buyer, executes a sales agreement and the same is examined and approved by the Ministry of Commerce by the time limit specified in the review decision.

Article 11: Where default divestiture is opted for, the divestiture obligor shall search for a buyer within the time limit specified in the review decision. The buyer of the divestment business shall satisfy the following requirements:

(1) being independent from the business operators involved in the concentration;

(2) having the necessary resources, capacities and intention to use the divestment business to participate in market competition;

(3) having secured the approvals of other regulators;

(4) not seeking financing from the business operators involved in the concentration to purchase the divestment business; and

(5) other requirements as specified by the Ministry of Commerce based on the specific circumstances of the case.

The factors of production in the buyer's possession or those that it can secure by other means shall complement the divestment business, and the buyer has the right to request that the Ministry of Commerce make necessary adjustments to the scope of the divested assets.

Article 12: The divestiture obligor shall submit to the Ministry of Commerce by the time limit specified in the review decision its candidate buyers and the sales agreement executed with the buyer. Any agreement executed by the divestiture obligor and the buyer, including the sales agreement and transitional agreement, may not contain provisions that run counter to the review decision.

The divestiture obligor shall submit not fewer than three potential buyers, monitoring trustees and divestiture trustees respectively for review by the Ministry of Commerce. Under special circumstances and with the consent of the Ministry of Commerce, the candidates for any of the foregoing may be less than three.

The Ministry of Commerce shall review the monitoring trustee, divestiture trustee and buyer candidates, the appointment agreements and the proposed sales agreement submitted by the divestiture obligor so as to ensure that they comply with the requirements of the review decision.

The time used by the Ministry of Commerce for review and approval shall not count toward the time limit for divestiture.

Article 13: If the review decision does not specify a time limit for default divestiture, the divestiture obligor shall find a suitable buyer and execute a sales agreement within six months from the date on which the review decision was rendered.

Depending on the specific circumstances of a case, the Ministry of Commerce may, after the divestiture obligor has given the reasons therefor, decide, in view of the circumstances of the case, to extend the time limit for the default divestiture, provided that such extension does not exceed three months.

If the review decision does not specify a time limit for trustee divestiture, the divestiture trustee shall search for a suitable buyer and execute a sales agreement within six months from the date of commencement of the trustee divestiture.

Article 14: The Ministry of Commerce may require the divestiture obligor to search for a buyer and execute a sales agreement before implementation of the concentration if:

(1) there is a relatively large risk to the maintenance of the competitiveness and saleability of the divestment business before the divestiture;

(2) the identity of the buyer has a decisive impact on whether the divestment business can recover its market competitiveness; or

(3) a third party asserts rights to the divestment business.

Article 15: The divestiture obligor shall transfer the divestment business to the buyer and complete transfer of ownership and other such relevant legal procedures within three months from the date of execution of the sales agreement.

Depending on the specific circumstances of a case, the Ministry of Commerce may, after the divestiture obligor has submitted an application and given the reasons therefor, decide, in view of the circumstances of the case, to extend the time limit for transfer of the business.

Article 16: If purchase of the divestment business by the Ministry of Commerce approved buyer reaches the reporting threshold for concentrations of business operators specified in the State Council, Provisions on the Reporting Threshold for Concentrations of Business Operators, it shall report the same to the Ministry of Commerce.

The divestiture obligor may not sell the divestment business to a buyer before the Ministry of Commerce renders its review decision.

Article 17: The provisions on divestiture in this Part may be applied mutatis mutandis to the implementation of the other types of restrictive conditions.

Part Four: Monitoring of Restrictive Conditions

Article 18: Where the restrictive condition is divestiture, the divestiture obligor shall submit the candidates for the monitoring trustee to the Ministry of Commerce within 15 days from the date of rendering of the review decision by the Ministry of Commerce, and the candidates for the divestiture trustee 30 days prior to commencement of the trustee divestiture period.

The divestiture obligor shall enter into written agreements with the monitoring trustee and divestiture trustee specifying their respective rights and obligations.

The divestiture obligor shall be responsible for paying remuneration to the monitoring trustee and divestiture trustee.

The divestiture obligor shall provide to the monitoring trustee, divestiture trustee and buyer of the divestment business the necessary support and convenience.

Article 19: Monitoring trustees and divestiture trustees shall satisfy the following requirements:

(1) being independent from the divestiture obligor and the buyer of the divestment business;

(2) having a professional team with the capacity to perform the trustee duties, and the team members having the professional knowledge, skills and relevant experience required to monitor the restrictive condition;

(3) having a feasible work plan presented by the trustee;

(4) monitoring the process of determining the buyer candidates; and

(5) other requirements as specified by the Ministry of Commerce.

Article 20: Until divestiture has been completed, the divestiture obligor shall perform the obligations set forth below in order to ensure the continued existence, competitiveness and salability of the divestment business:

(1) maintaining the independence between the divestment business and its retained business, and taking all necessary measures to manage the divestment business in a manner that is most appropriate to its development;

(2) not carrying out any acts that could have an adverse impact on the divestment business, including engaging key personnel of the divestment business and obtaining trade secrets or other confidential information of the divestment business;

(3) designating managers specifically responsible for managing the divestment business; the managers shall perform their duties under the monitoring of the monitoring trustee, and their appointment and replacement shall require the consent of the monitoring trustee;

(4) ensuring that potential buyers can obtain sufficient information on the divestment business in a fair and reasonable manner so as to evaluate its commercial value and growth potential;

(5) providing to the buyer, at its request, the necessary support and convenience so as to ensure the smooth handover and stable operations of the divestment business; and

(6) transferring the divestment business to the buyer and performing the relevant legal procedures in a timely manner.

The divestiture obligor shall, in a timely manner, report to the Ministry of Commerce on its compliance with the review decision, carrying out of the divestiture and performance of the relevant agreements.

The monitoring trustee shall be responsible for monitoring the matters reported on by the divestiture obligor.

Article 21: A monitoring trustee shall perform the following duties under the scrutiny of the Ministry of Commerce:

(1) monitoring the performance by the divestiture obligor of its obligations specified in these Provisions, the review decision and relevant agreements;

(2) evaluating the buyer candidates recommended by and the sales agreement to be executed by the divestiture obligor, and submitting an evaluation report to the Ministry of Commerce;

(3) monitoring the performance of the sales agreement and regularly submitting monitoring reports to the Ministry of Commerce;

(4) promoting reconciliation in disputes arising between the divestiture obligor and a potential buyer over divestiture matters; and

(5) at the request of the Ministry of Commerce, submitting other reports on the divestiture.

It may not disclose the various reports and related information it submitted to the Ministry of Commerce in the course of performing its duties.

Article 22: During the trustee divestiture period, the divestiture trustee shall be responsible for finding a buyer for the divestment business and reaching a sales agreement.

The divestiture trustee shall have the authority to sell the divestment business without a reserve price.

Article 23: If the divestiture obligor breaches the review decision by failing to effectively perform its divestiture obligation in a timely manner, a relevant government department, industry association, business operator, consumer or other such entity or individual may report the same to the Ministry of Commerce. The Ministry of Commerce shall maintain the confidentiality of the party that made the report.

Article 24: The Ministry of Commerce may demand that the concentration threshold reporter appoint a trustee to monitor the performance of another type of restrictive condition. The provisions on divestiture of this Part may be applied mutatis mutandis to the duties and obligations of a party with another restrictive condition obligation and the selection and duties of a trustee.

Part Five: Modification and Lifting of Restrictive Conditions

Article 25: Once a review decision has entered into effect, the Ministry of Commerce may conduct a new review of a restrictive condition and modify or lift the same.

Article 26: If a business operator wishes to apply for the modification or lifting of a restrictive condition after a concentration, it shall submit a written application to the Ministry of Commerce and give its reasons therefor.

Article 27: When evaluating a request for the modification or lifting of a restrictive condition, the Ministry of Commerce shall consider the following factors:

(1) whether a material change in the concentration transaction parties has occurred;

(2) whether a substantive change in the competition in the relevant market has occurred;

(3) whether implementation of the restrictive condition is unnecessary or impossible; an

(4) other factors.

Article 28: If a business operator applies for the modification or lifting of a restrictive condition, the Ministry of Commerce shall give it a written reply in a timely manner. If the Ministry of Commerce decides to modify or lift the restrictive condition, it shall publicly announce the same in a timely manner.

Part Six: Legal Liability

Article 29: If a business operator involved in a concentration breaches the review decision, the Ministry of Commerce shall order it to rectify the matter within a specified period of time. If the circumstances are serious, the Ministry of Commerce shall order it to halt the implementation of the concentration, dispose of the shares or assets within a specified period of time, transfer the business within a specified period of time and take other measures necessary to restore the pre-concentration state, and may impose a fine of up to Rmb500,000.

Article 30: If a trustee provides false information or withholds information, or fails to perform these Provisions with due diligence, the Ministry of Commerce may order it to rectify the matter.

Article 31: If a buyer of divestment business violates these Provisions, the Ministry of Commerce shall order it to rectify the matter.

Part Seven: Supplementary Provisions

Article 32: These Provisions shall be effective as of January 5 2015. The Tentative Provisions for the Implementation of Asset or Business Divestitures of Concentrations of Business Operators (Announcement of Mofcom [2010] No.41) shall be repealed simultaneously.