This is the second of two new client alerts relating to China's Anti-Monopoly Law ("AML") merger control regime, and focussing on draft rules recently released by China's Ministry of Commerce ("MOFCOM").  These drafts indicate that MOFCOM is well advanced in its efforts to implement a cohesive and relatively transparent merger control regime under the AML, which suggests many more transactions may be scrutinized under the regime in the months ahead.  All parties engaging in significant M&A deals or similar transactions need to be aware of their obligations under the AML regime, and to keep pace with the fast-developing processes and obligations the regime may impose upon them.

As reported in our client alert dated 21 January 2009 (MOFCOM Releases New Consultation Drafts Relating To China's Merger Control Regime - Part I), MOFCOM has recently released four new consultation drafts relating to the AML merger control regime. 

In our Client Alert Part I, we highlighted key elements of the Interim Measures for Notification of Concentration of Undertakings, which resolve some of the uncertainties that have surrounded the mandatory transaction notification obligations in the AML.  MOFCOM is accepting submissions regarding the Draft Notification Measures until 16 February 2009.

In this Client Alert Part II, we review key elements of the three other consultation drafts released by MOFCOM this week.  Those documents are:

  • Interim Measures for Review of Concentration of Undertaking ("Draft Review Measures");
  • Interim Measures for Collecting Evidence on Suspected Monopolistic Concentration of Undertakings below the Thresholds ("Draft Evidence Collection Measures"); and
  • Interim Measures for Investigating and Disposing of Suspected Concentration of Undertakings Failing to File Notification in Accordance with the Law ("Draft Investigation Measures").

Draft Review Measures

The Draft Review Measures include provisions relating to the following matters:

  • when concentration notification documents can be withdrawn;
  • when undertakings may voluntarily make notifications, or voluntarily provide additional materials in respect of a notified concentration (beyond the documents formally required to be provided); and
  • the process that will be followed when MOFCOM convenes a hearing to obtain information from third parties relating to a concentration under review ("Review Hearing").

For parties that may have to submit to China's merger review processes under the AML, the Articles in the draft relating to Review Hearings will be of significant interest. 

These Articles highlight MOFCOM's right to solicit views about concentrations from government bodies, industry associations, and competitors or customers of the undertakings involved in the concentration ("Concentration Parties").  These are rights that MOFCOM appears to have exercised extensively in several concentration-review cases since the AML commenced, such as its review of InBev SA's takeover of the China operations of Anheuser-Busch Co.

The draft also contains new information regarding the process MOFCOM will follow when it engages in 'substantive review' of a concentration (that is, if it decided during the initial 30 day preliminary review stage that MOFCOM needs further time to conduct detailed analysis of the concentration).  Specifically, the draft provides that if MOFCOM considers the concentration has or may have the effect of eliminating or restricting competition ("Anti-Competitive Effects") during this stage, it may notify the Concentration Parties of this in written form, and set a reasonable time limit for those undertakings to submit any defence.  If a defence is not filed on time, MOFCOM will deem that the undertaking has no objection to a finding that Anti-Competitive Effects exist.

Finally, the draft also touches on the conditions that MOFCOM or the Concentration Parties may propose to apply to concentrations to mitigate Anti-Competitive Effects.  According to the draft, where such proposed conditions are submitted by Concentration Parties, they must make it clear if any elements of the proposed conditions are confidential.  Additionally, a non-confidential version of their proposals must be provided, so that MOFCOM can use this in discussions with third parties.  The proposed conditions are also required to be 'of realistic operability'. 

If MOFCOM determines that such conditions would not eliminate relevant Anti-Competitive Effects arising from the concentration, it is required to prohibit the concentration.  Alternatively, if MOFCOM does proceed to impose the conditions, the draft indicates that it will establish a system to monitor their performance, and the Concentration Parties will be required to 'periodically' report on the progress made towards their implementation.

Draft Evidence Collection Measures

The Draft Evidence Collection Measures outline the process MOFCOM will follow when it decided to launch evidence collection before investigation of a concentration that does not meet the turnover-based thresholds ("Turnover Thresholds") that China's State Council has adopted to determine when concentrations need to be notified to MOFCOM for competition-related review under the AML ("Below Threshold Concentration").

According to this draft, when MOFCOM officials engaging in a preliminarily analysis of whether a Below Threshold Concentration will result in Anti-Competitive Effect, they may have regard to a range of matters such as the market shares of the Concentration Parties, and the territorial scope involved in the concentration. 

Notably, public reaction is also referenced as a permitted consideration.  This is a concern, as it would seem more appropriate for public reaction to be considered (if at all) when MOFCOM is determining whether to conduct preliminary analysis of a concentration - not when MOFCOM is actually engaged in that process of preliminary analysis.  As noted above, the draft indicates that MOFCOM's preliminary analysis will focus on determining whether a concentration will give rise to Anti-Competitive Effects - and consideration of public reaction may sometimes obscure rather than aid such assessment.

If the officials investigating a Below Threshold Concentration believe it may give rise to Anti-Competitive Effects, they may launch an investigation after securing relevant MOFCOM internal approvals.

The draft also outlines the evidence collection measures that MOFCOM can employ during that investigation, which include asking third parties such as suppliers, clients, and competitors to provide input or verify relevant facts and data.

Further, the draft lists certain matters on which MOFCOM may focus when collecting evidence, which include ascertaining the market shares of the Concentration Parties, the degree of market concentration, and the opinions of relevant industry associations and government bodies. Interestingly, MOFCOM is also empowered to collect evidence regarding whether the Concentration Parties have previously engaged in relevant breaches of the AML.  Again, it is difficult to see how this is a relevant consideration when MOFCOM's primary focus is on determining whether a present concentration will give rise to Anti-Competitive Effects. 

Finally, where:

  • MOFCOM's evidence collection establishes that there are sufficient grounds to prove that the Below Threshold Concentration has or may have an Anti-Competitive Effect; or
  • the Concentration Parties fail to cooperate with MOFCOM during the evidence collection process, and MOFCOM determines on the best evidence available to it that the Below Threshold Concentration has or may have an Anti-Competitive Effect,

the investigating MOFCOM officials may commence formal review of the concentration after again securing relevant internal MOFCOM approvals.   MOFCOM can also ask relevant Concentration Parties to file a notification in respect of the concentration.

Draft Investigation Measures

The Draft Investigation Measures outline the process MOFCOM will follow where it believes that an undertaking has failed to adhere to MOFCOM's mandatory notification requirements in respect of a concentration that achieves the Turnover Thresholds.

The draft indicates that MOFCOM may have regard to media reports and information provided by government departments when determining whether a concentration falls within this category.  It also appears that MOFCOM may consider written reports provided by other concerned parties such as competitors and customers of the Concentration Parties.

Where MOFCOM believes that such a concentration exists, it can conduct an investigation, including, employing its broad powers under the AML to conduct on-site inspections, seize relevant documents, and question representatives of the Concentration Parties.  The investigated parties have a right to state their opinion on the matter, and MOFCOM is obliged to verify the accuracy of relevant information they may provide in their defence.

As MOFCOM will formally notify the Concentration Parties if an investigation is conducted, the draft includes provisions dealing with how service of written documents on them may occur.  Specifically, Article 9 provides that such service shall be effected with reference to relevant provisions set out in the Civil Procedure Law of the People's Republic of China.

It also appears that such service may be conducted by means of a public announcement, with MOFCOM required in such cases to publicize the announcement documents on its official website.  In those cases, the documents are deemed to have been served after the elapse of a specified period since the date of the public announcement.  That period is two weeks, unless the documents are served outside of China (including service to Hong Kong, Macau or Taiwan) by means of public announcement, in which case the relevant period is six weeks.

Where MOFCOM determines that the investigated concentration should have been notified, it may direct relevant Concentration Parties to submit a notification in a timely manner, and impose a fine on them of less than 500,000 RMB.  Suspension orders may also be placed on such concentrations where they are still in the process of being implemented, and MOFCOM can direct that a completed concentration be relevantly unwound if it is deemed to have an Anti-Competitive Effect.

Next steps

MOFCOM has directed that its deadline for submissions on these drafts is 16 February 2009.

As mentioned in our Client Alert Part I, JSM is working closely withn the Chinese authorities in an effort to ensure they address a number of issues and uncertainties relating to the drafts, and any parties who would like to contribute to this process are invited to contact us for assistance. 

For more information on the AML and the merger control regime, please visit our dedicated AML website at, or get in touch with one of the key contacts referenced below.

For further information, please contact:
Hannah Ha (
John M. Hickin (
Gerry O'Brien (
Learn more about our Hong Kong office and Antitrust & Competition practice.