Jurisdiction - China
Reports and Analysis
China – Merger Clearance Requirements: An Update.

18 July, 2014



The Anti-Monopoly Bureau (AMB) of the Ministry of Commerce of China (MOFCOM) has recently published the following provisions and guidelines relating to the review procedure for merger clearance with AMB (AMB Clearance):


  1. “Tentative Provisions on Standards for Simple Cases of Concentration of Undertakings (关于经营者集中简易案件适用标准的暂时规定)” (Standards), published on 11 February 2014;
  2. “Trial Guidelines on Notification of Simple Cases of Concentration of Undertakings (关于经营者集中简易案件申报的指导意见(试行))” (Trial Guidelines) , published on 18 April 2014; and
  3. revised “Guidelines on Notification of Concentration of Undertakings (关于经营者集中申报的指导意见) (Revised Guidelines), published on 6 June 2014.


Simple Case Notification


The Standards spell out 6 circumstances in which a transaction can be considered a “simple case” which is basically a notifiable transaction unlikely to create competition issues in China. The Trial Guidelines provide guidance on the notification procedure for a “simple case”. The Standards and Trial Guidelines are well-intended to help expedite the review of “simple cases”, to enable applicants to obtain the AMB Clearance more quickly.


AMB will not initiate a “simple case” review, and will undertake such “simple case” review only upon application by the notifying parties using the simple case notification form (经营者集中简易案件反垄断审查申报表). This simple case notification form, compared to the usual or standard notification form (经营者集中反垄断审查申报表), requires less information and materials to be provided.


Note that if AMB considers the case to be involving a transaction that does not qualify as a “simple case”, it will reject the application, and the notifying parties will have to re-do the notification as for a normal/standard case. It is thus advisable to have a pre-notification consultation with AMB (an optional step in the procedure) to get a sense of whether the subject transaction qualifies as a “simple case”.


The Trial Guidelines do not promise a shorter review time for a “simple case”, and actually provide opportunities for third parties to challenge the case. A longer review time and process could indeed arise if third parties decide to raise questions on the transaction. Thus, it remains to be seen how helpful the Standards and Trial Guidelines are in expediting AMB Clearance for a “simple case”.


Revised Guidelines


The Revised Guidelines are applicable to a normal/standard notifiable transaction (i.e. one that does not qualify as a “simple case”). Compared to the predecessor guidelines issued in 2009, the Revised Guidelines are a lot more comprehensive with a number of articles added to provide clearer and more practicable guidance to practitioners assisting with the AMB Clearance. The added articles seek to clarify questions often raised by the notifying parties and practitioners involved in the process, relating largely to the (a) definition of control; (b) calculation of turnover; (c) concentration in a newly established joint venture; and (d) pre-notification consultation/meeting with AMB.


(a) Definition Of Control


Under the Anti-Monopoly Law (AML), concentration of undertakings refers to:


  1. merger of undertakings;
  2. acquiring control of other undertakings through acquisition of shares or assets; and
  3. acquiring control of other undertakings by contract or otherwise, or acquiring the ability to exercise decisive influence over the other undertakings.


The AML does not, however, clarify or define “control” referred to in the above transactions. The Revised Guidelines provide detailed guidance as to when an undertaking is deemed to acquire control over or the ability to exert a decisive influence on the other undertakings via a transaction, and suggested that reference be made to the transaction/concentration document, the target’s articles of association and other relevant factors. Such relevant factors include:


  1. purpose of the transaction and future business plan;
  2. shareholding structures of other undertakings before and after the transaction, and the changes;
  3. matters subject to shareholders’ voting rights and the voting mechanism, as well as past records on attendance and voting outcome;
  4. board composition or supervisory committee composition of other undertakings, and their decision making mechanism;
  5. appointment and dismissal of senior management personnel of other undertakings;
  6. relationship among shareholders and directors, and whether there exists any proxy arrangement or persons acting in concert; and
  7. whether there exists between the undertakings any major business relationship or cooperation agreements, etc.


(b) Calculation Of Business Turnover


Determining the business turnover can be confusing, as it can be a very technical matter and tends to vary with the accounting method adopted by the companies concerned. The Amended Guidelines explain the basis of calculation and provide clarifications, largely as outlined below:


  • allocation of turnover between countries to follow the region/country where the buyers of the products/services are based;
  • business turnover within the “territory of China” to include the operator’s exports to China, and exclude exports out of China;
  • business turnover of a single business operator not to include turnover of business that has been sold or not controlled by the operator in the preceding financial year;
  • business turnover of all the controlling parties to an undertaking to be counted if the undertaking is under the joint control of those controlling parties; and
  • if the transaction involves acquisition of part of seller’s assets or equity interests (target) and seller will no longer have control over the target after the transaction, then to include only turnover of the target (rather than seller’s entire turnover).


(c) Concentration In A Newly Established Joint Venture


The AML is unclear as regards the notifiability of a joint venture to be newly established. The Amended Guidelines clarify that a joint venture which meets the filing threshold and will be jointly controlled by two or more operators will be deemed a concentration; but if only one operator will control the joint venture to the exclusion of control by the other operators, the joint venture will not be treated as a concentration.


(d) Pre-Notification Consultation/Meeting With AMB


The Amended Guidelines provide further practical guidance relating to the conduct of pre-notification consultation/meeting with AMB. Such pre-notification consultation/meeting with AMB is not mandatory in the AMB Clearance process, and is for the notifying parties to decide whether or not to apply for such a session with AMB. A party intending to apply for such a meeting with AMB will need to submit an application to AMB in writing, and AMB will only agree to holding such a meeting with the applicant based on a genuine and definite transaction.


The Amended Guidelines indicate questions that could be discussed at a pre-notification consultation with AMB. These include questions on the notifiability of the transaction concerned, the documents and information required to be provided, questions and issues relating to market definition, whether the transaction qualifies as a “simple case”, submission and review procedure, timing of notification, etc.


Apart from the above, the Amended Guidelines also provide clarifications and guidance with regard to various other aspects in the AMB Clearance process, such as in relation to the notification timeline, filing of a notification, withdrawal of a notification, etc.


The above goes towards demonstrating MOFCOM’s unceasing efforts to simplify and expedite the AMB Clearance process. Although some areas of uncertainty inevitably remain, it is generally accepted that the regulatory changes as noted above would help towards increasing the transparency and efficiency of the review process, as well as the predictability of outcome.




For further information, please contact:


Guat Kim Toh, Partner, Deacons

[email protected]

Minning Wei, Deacons

[email protected]


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