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• Either party to the Transaction represents a 20% market share in China; or
• Either party to the Transaction will account for a 25% market share in China upon completion of the Transaction.
It is also stipulated that, upon request of any domestic competitor or a relevant government department or trade association, MOFTEC and SAIC may sua sponte subject a transaction that does not meet any of the specified thresholds to the reporting requirement.
MOFTEC and SAIC believe that such transaction involves substantial market shares, or has a significant impact on market competition, national well being, or national economic safety. This provision largely expands the coverage of the reporting requirements.
The rules extend the reporting requirements to offshore mergers and acquisitions as well. A merger or acquisition scheme in an offshore transaction must be submitted to MOFTEC and SAIC at the time the same is publicized in or submitted to the home jurisdiction, if the transaction meets any of the following conditions:
• Either party to the transaction owns assets valued RMB3 billion or more in China;
• Either party to the transaction has an annual sales volume of RMB1.5 billion or more in the local market of China in the current year;
• Either party to the transaction and/or its affiliates represent a 20% market share in China;
• Either party to the transaction and/or its affiliates will account for a 25% market share in China upon completion of the transaction; or
• Upon completion of the transaction, any party to the transaction will own, either directly or indirectly, equity interests in 15 or more foreign investment enterprises in China which engage in the same trade.
• Certain types of transactions are exempted from the reporting requirements after meeting the specified thresholds. These pragmatically set exemptions cover transactions that may enhance competition, restructure enterprises operating at loss without reducing job opportunities, bring in advanced technology and management, or improve environmental conditions.
Main Shortcomings and Issues to Be Clarified
Certain problems and unresolved issues concerning the following aspects remain along with the constant legislative improvement, which hinder the effectiveness of the existing legal framework for antitrust and competitive practices in China.
• Procedures and Documents. Article 19, Article 21 of the M&A Rules state that MOC and SAIC will examine whether the merger or acquisition will cause excessive concentration in the domestic market, impede or disturb rightful competition, or harm domestic consumers’ benefits and decide whether to approve such merger or acquisition hereafter. Again, no guidance is provided regarding methodology for determining whether these criteria are satisfied. Moreover, unlike Article 19, Article 21 gives no timeline on the approval process, nor does it say anything about public hearing. The rules also failed to include a list of items to be reported or documents to be produced.
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