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China – Imposed Sanctions For Antitrust Violations In M&A Deals.

15 January, 2015



In this article, we look at a the sanctions imposed by the PRC Ministry of Commerce (“MOFCOM”) for antitrust violations, involving (i) failure to submit merger control filing for M&A transaction; and (ii) non-compliance with undertakings given to MOFCOM in connection with a conditional approval.

The sanctions were publicized by MOFCOM on 8 December 2014 on its official website.1 This also marked the first time that MOFCOM has penalised a company for failing to file where a transaction has met the regulatory thresholds2 under the Chinese merger filing regime.

(i) Failure To Submit Antitrust Filing

Unisplendour Group Co., Ltd. (“Unisplendour”) was fined RMB300k(approximately USD48k) for failing to notify to MOFCOM its acquisition of 100% shareholding in RDA Microelectronics, Inc., a NASDAQ company.

Under the applicable law and regulations, MOFCOM has wide powers ranging from making an order for a transaction to be suspended, to requiring a transaction to be “unwound”.4
In this case, the share purchase agreement for the acquisition was signed in November of 2013, and the deal had already been completed in July of 2014. No “unwinding” order was issued as MOFCOM, after assessing the competitive effect of the transaction, did not find sufficient cause for concern. Under the applicable regulations5, a finding of anti-competitive effect is necessary before MOFCOM could impose an order to unwind a transaction.

(ii) Breach Of Prior Undertakings To MOFCOM

The other case involved Western Digital, one of the major hard disk manufacturers in the world, which was fined RMB 300k(approximately USD 48k) for breach of the undertakings given to MOFCOM, in connection with its acquisition of Viviti Technologies Limited (wholly-owned subsidiary of Hitachi, “Viviti”) in 2012.7 As a condition of MOFCOM’s approval at that time, Western Digital had made various undertakings that would enable Viviti to continue operating its business (post-acquisition) with autonomy, thus preserving market competition.

Western Digital was found to have violated its undertakings by dismissing the staff in the R&D department of Viviti, and transferring the employees to Western Digital without MOFCOM’s approval. Western Digital also transferred its US subsidiary of Viviti to become a wholly-owned subsidiary of an affiliate of Western Digital.

Western Digital has been directed to take remedial measures within 45 days to comply with the MOFCOM requirements.

What this means for M&As?

Although China merger filing regime has been in place for a number of years, it is a well-known fact that a high proportion of M&A transactions avoided antitrust filings despite meeting the filing thresholds8.

The recent sanctions demonstrate that MOFCOM does not tolerate this any longer, and will not hesitate to take enforcement actions. More significantly, the company being fined, Unisplendour, is state-owned, meaning that no one is immune, even if it is a Chinese state- owned enterprise.

M&A deal-makers who chose to ignore filing requirements, whether in China, or elsewhere do so at their own risk. This latest case is reminiscent of another acquisition by the China Huawei group of 3Leaf, a cloud-computing company in Silicon Valley, where Huawei had omitted to make a national security filing, and was forced to unwind the transaction retroactively after the deal was reported to CFIUS, the United States authority in charge of national security review.

Going forward, deal-makers should be mindful of regulatory filings and ensure due compliance.


End Notes:



1 http://tfs.mofcom.gov.cn/article/ckts/ckzcfg/

2 Under the PRC State Council Measures on Reporting Standards of Concentration of Undertakings

3 MOFCOM Decision [2014]788

4 Article 48 of the PRC Anti-monopoly Law

5 http://fldj.mofcom.gov.cn/article/c/201201/20120107921682.shtml

, in Article 13 of the Interim Measures for the Investigation and Handling of Failure to Declare Concentration of Undertakings in Accordance with the Law


6 MOFCOM Decision [2014]786 and Decision [2014]787

7 http://fldj.mofcom.gov.cn/article/ztxx/201203/20120307993758.shtml

8 On average, MOFCOM received one to two hundred filings per year, but statistics of China-related M&A transactions as reported in the media far outnumbered this.




For further information, please contact:


Chunfai Lui, Partner, Stephenson Harwood

[email protected]


Homegrown Competition & Antitrust Law Firms in China 


International Competition & Antitrust Law Firms in China

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