The Impact of New Merger Control Provisions in China

Summary

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• Killer acquisitions risk restricting competition and are therefore coming under increasing regulatory scrutiny
• New regulations set out a process for notification and review of below-threshold transactions, and clarify the approach by the antitrust authority
• Examination of previous remedy cases provides some helpful clues for parties to relevant transactions
• Certain vital steps should be taken including conducting a thorough pre-transaction merger analysis, assessing the sensitivities of the transaction, and carefully evaluating and balancing risks

In today's "winner takes all" business environment, killer acquisitions have become an increasing concern within the merger control landscape. These acquisitions often target start-ups that emerge as a crucial source of competition against incumbent enterprises, and they are known to suppress or even eliminate such potential competition before they mature into a real threat.

The regulation of killer acquisitions has been a focus in established antitrust jurisdictions, including China. Effective April 15, 2023, the Provisions for Reviews of Concentrations of Business Operators (Merger Control Provisions) (经营者集中审查规定) have introduced significant changes to the transaction regime in China, including the implementation of a notification and review system for M&A transactions that fall below the mandatory notification threshold but may have anti-competitive effects. This system is widely interpreted as targeting killer acquisitions, and to a certain degree, creates a wave of uncertainty for transactions connected to China.