Baby steps

The process to enact a comprehensive set of antitrust laws in China has spanned an entire cycle of the Chinese zodiac calendar (12 years), with little success. No concrete laws have been set despite multiple drafts being drawn up and circulated, but the March 8 release of the Guidelines on Antitrust Filing for Mergers and Acquisitions of Domestic Companies by Foreign Investors by the Ministry of Commerce is a step in the right direction to clarify the antitrust review process in China.
These new guidelines, which supersede a version issued on April 20 last year, clarify the procedures and documents required to file for a merger in China. The main contents of the guidelines are below.
Pre-filing consultation: The filing party or its agents are encouraged to initiate information contacts with the Anti-Monopoly Investigation Office of the Ministry of Commerce prior to the formal filing.
Filing materials: China’s Ministry of Commerce says it requires information on:
-Each party in the M&A transaction
-Details of the M&A transaction
-Relevant markets affected by the proposed transaction, including product and geographic markets, trade associations, top five competitors, and state of competition, including entry barriers, cost of entry, and cooperation agreements
-Sales and market share for all parties in the past two fiscal years
-Enterprises affiliated with the parties involved in the M&A transaction
-The M&A agreement and audited financial statements, translated into Chinese
-Status of filings in other jurisdictions.
Timing: The formal filing must be made prior to the public announcement of the proposed transaction, or for extraterritorial transactions, at the same time the pre-merger filing submitted to other authorities.
Review period: The initial review period is 30 days upon receipt of the complete filing materials, but may be extended to 90 days.
Confidentiality: The filing may be confidential, but if so, an additional non-confidential set of materials must also be submitted.
Lawyers have commented that these guidelines, while well-intentioned, are troublesome. The guidelines increase the filing burden already required. It is unclear exactly what documentation the parties involved must provide in practice. Furthermore, certain key terms in the filing requirements, such as “control,” are ambiguous.
Currently, the antitrust review process for all M&A transactions in China is governed by a separate law called the M&A Provisions. It is unclear which set of laws will ultimately govern the M&A antitrust review process. For now, the decision is still pending, as a draft of the guidelines is awaiting its second reading before China’s congress.