According to the Chinese zodiac, 2011 was the year of the rabbit—symbolizing the ascendancy of principles such as caution and diplomacy. After the Chinese New Year in late January 2012, a markedly different period commenced: the Year of the Dragon. This period is traditionally defined by ambition and accomplishment.

For those inclined to look for such alignments, it is all too easy to reconcile developments under the Anti-Monopoly Law (AML) in 2011 with the traits that the Chinese horoscope ascribes to the year. By the third anniversary of the AML’s commencement in August 2011, all notified deals addressed up to that point in the year had been cleared unconditionally. Perhaps the most notable AML-related development during the preceding months was the signing of a memorandum of understanding (MOU) between antitrust authorities in China and the United States. Diplomacy and caution did indeed appear to be the order of the day.

As if gathering force in preparation for the arrival of the dragon, however, the final months of 2011 saw a raft of more significant AML-related developments. In addition to the announcement or conclusion of several high-profile anti-competitive conduct investigations, there was a flurry of significant merger review decisions from October to December. There were also indications that the organization charged with enforcing the AML merger control regime, the Anti-Monopoly Bureau (AMB or the Bureau) of the Ministry of Commerce (Mofcom) may soon begin penalising business operators who fail to give notice about relevant M&A deals (and suspend them until approved). The impact of the AML merger control regime thus looks set to grow.

In this article we will summarise major developments relating to the regime during 2011. And, in the spirit of the zodiac, we will also speculate on the outlook for the regime following the coming of the dragon in 2012.

AML Merger Regime—Key Developments in 2011

Recent Review Record

The merger control regime has been the most active area of AML-related enforcement since the law commenced on 1 August 2008. At the time of writing (February 2012), the AMB had cleared more than 380 transactions, rejected one deal, and placed conditions on 10 others.1 This represents an unconditional clearance rate of around 97 percent.

According to Zheng Wen, Deputy Director-General of the AMB, the number of anti-monopoly filing cases the bureau handles is increasing at an annual growth rate of more than 60 percent.

Below is a summary of the publicly available statistics on those merger control filings accepted for review by the AMB since implementation of the AML, showing which transactions have received either clearance, conditional clearance or rejection decisions.

Merger Control Filings Reviewed by the AMB Under AML


Cleared without conditions

Cleared with conditions  attached2















More than 160



Four Conditional Approval Decisions in 2011

As noted in the introduction to this article, little news was heard from the AMB in terms of AML enforcement during the first half of 2011. However, four “adverse” merger control decisions were issued from June to December 2011, each sparking considerable discussion and interest. These decisions relate to the following deals:

  • The proposed US$7.8 billion merger of Russian potash producers Uralkali and Silvinit, on which the AMB imposed four behavioural conditions relating to the merged entity’s future levels of supply and pricing for Chinese customers.
  • The proposed acquisition by Alpha Private Equity Fund V (Alpha V) of textile factory machinery manufacturer Savio Macchine Tessili S.P.A. The AMB imposed structural conditions on this transaction that required Alpha V to sell out its equity in another competing company in which it held a minority interest but perhaps could have (Mofcom left this question open) exercised control. As there is no documented guidance on the issue of when a minority shareholder may be deemed to have control over an undertaking under the AML merger control regime, comments in the decision statement about this issue provide a small degree of illumination for an otherwise uncertain area of anti-monopoly practice in China.

  • The proposed joint venture by GE (China) Co., Ltd. and China Shenhua Coal to Liquid and Chemical Co., Ltd., on which the AMB imposed two behavioural conditions in relation to the supply of relevant products and the use of other competing technologies. This is only the second adverse Mofcom decision directly concerning Chinese companies, the first decision being the blocking of Coca-Cola’s proposed acquisition of Huiyuan Juice Group. This was also the AMB’s first published decision relating to formation of a joint venture, confirming that such transactions do require notification if the concerned parties meet the relevant turnover thresholds. This was understood to be the case from past practice of the AMB, but was not previously clearly stated in the AML, in related implementing rules or in any prior Bureau decisions.

  • The US$1.4 billion acquisition by Seagate Technology (Seagate) of the Samsung Electronics (Samsung) hard disk drive business, which Mofcom determined would be likely to restrict competition by removing one of only five hard disk drive manufacturers from the market and increasing the possibility of cooperation among the remaining players. Mofcom was alone among international competition regulators in requiring remedies for this transaction, ordering Seagate to adopt several measures aimed at ensuring Samsung’s hard disk drive business effectively remained an independent competitor in the market for the short-to-(potentially) medium term. The company was also required to increase the production of Samsung hard disk drives within six months of the merger clearance, and to invest at least US$800 million every year into research and development within three years of the merger clearance. It is interesting to note that the review process in relation to these transactions was shorter than the average formal review period for the previous six conditional clearance decisions. However, the general experience of our firm in making notifications to the AMB suggests that the process as a whole is—on average for notified transactions—lengthening. This is mainly evident in growing delays in the pre-acceptance period, and commonly extended periods to secure even unconditional clearance decisions.

Although the level of detail in decision statements of the AMB remains limited, China’s merger review regime is considered by most observers to be demonstrating an increased sophistication in methodology and analysis. The AMB’s decision statements are gradually including more comments on the Bureau’s assessment of the relevant market, market shares, market structure, market entry and applied “theories of harm.” As discussed below, this appears to reflect a growing confidence in case evaluation techniques that are now well documented and appear consistent with international best practice.

New Legislation During 2011

The only significant implementing regulation issued by the AMB in 2011 was the Interim Provisions on Evaluation of Impact of Concentrations of Business Operators on Competition (Interim Provisions). The Interim Provisions expand on various “key considerations” for merger reviews that are set out in Article 27 of the AML, and also briefly articulate various theories of harm that Mofcom may consider when analysing transactions. The rules came into effect on 5 September 2011.

However, several further implementing regulations were in development during 2011, and one that was adopted in the early months of 2012 is discussed in the latter sections of this article.

Growing links with foreign regulators during 2011

On 27 July 2011, the AMB, in conjunction with the two other key Anti-Monopoly Enforcement Authorities (relevant bureaus/departments under the NDRC3 and SAIC4), signed the Sino-US Anti-monopoly and Antitrust Cooperation Memorandum of Understanding (MOU) with two key US antitrust enforcement agencies: the Department of Justice (DOJ) and the Federal Trade Commission (FTC). This MOU founded a long-term cooperation framework between the China and US anti-monopoly agencies and encouraged both sides to work toward effective enforcement of anti-monopoly laws and policies. A similar MOU was signed with UK competition authorities some months earlier.

Another notable development relating to competition diplomacy arose out of the Second BRICS International Competition Conference held in September 2011. At this conference, representatives of the BRICS countries (which include Brazil, Russia, India, China and South Africa) signed the Beijing Consensus. This document calls on all countries and regions involved to build more collaboration and adopt effective competition policies that are vital for ensuring fair competition, protecting the interests of consumers and promoting the healthy development of market economies.

At the same conference, China also signed with Russia the Memorandum of Understanding between SAIC of China and FAS of Russia5 on Implementation of Agreement between the Government of the People’s Republic of China and the Government of the Russian Federation on Cooperation and Exchange in Fields of Anti-Unfair Competition and Anti-Monopoly (2012-2013).

Signing of the above-mentioned documents represents a significant step forward for the regime, formalising the links between the relevant Chinese and foreign competition regulators. It is worth noting, however, that those links have already been developing for many years. In particular, the AMB has regularly exchanged opinions with the European Commission and the above-mentioned US authorities since the AML commenced, and these foreign regulators have for some years also conducted capability-building and technical assistance programmes for the AMB officials.

Indeed, during 2011 delegations led by senior officials of the AMB paid visits to a number of competition authorities around the world. Senior officials also met in Beijing with competition officials from the European Union, the United States, the United Kingdom and Russia. The AMB also hosted several international competition seminars.

What to Expect for 2012

During the above-mentioned Second BRICS International Competition Conference, a senior official of the AMB declared that the Bureau was committed to taking steps to “further improve the transparency and efficiency of handling and reviewing merger control cases.”

Consistent with this promise, several important implementing regulations were under development by the Bureau during 2011. These include:

  • The Interim Measures for Investigating and Disposing of Suspected Concentration of Undertakings Failing to File Notification in Accordance with the Law (Interim Measures on Failure to File), which documents the steps the AMB may take to investigate and penalise business operators who fail to comply with the mandatory notification obligation for relevant M&A deals under the AML; and
  • The Interim Measures for Investigating and Disposing of Suspected Monopolistic Concentrations of Undertakings below the Thresholds for Notification, which confirms the AMB’s ability to review M&A deals that do not satisfy the designated mandatory notification turnover thresholds, but that nonetheless are considered to warrant investigation due to potential adverse impacts on competition in one or more relevant markets.

A finalised version of the Interim Measures on Failure to File was adopted in January 2012, and is likely to pave the way for the AMB to start actively penalising business operators who infringe the notification obligation or other aspects of China’s merger control regime. Although the AMB technically has this right under the AML, it is understood that the Bureau has held off from issuing penalties while it documents the specific steps that will be taken and provides time for all business operators (including domestic Chinese businesses, some of which have been publicly chastised for avoiding the filing obligation) to get their house in order for compliance with the regime. With the AML now well into its fourth year of operation, it is likely that the year of the dragon will see the AMB take a sterner approach to transgressions.

Some More Sophisticated Merger Review Mechanisms

A Fast-Track Review Mechanism?

The increasing volume of notifications being handled by AMB case review officials is adding weight to calls for introduction of a formal “fast-track” review mechanism for deals which trigger the notification obligation but clearly have little nexus to China or evident competition issues.

In the United States, a fast-track procedure was introduced in 2006 for the review of concentrations which do not raise any competition concerns. Compared with the normal review procedure, under the fast-track procedures fewer documents and less information are required and the review process takes a maximum of 15 business days.

Contemplation of a fast-track review process under the AML regime did appear in one of the drafts of China’s Provisions of the State Council on the Notification of Concentration of Business Operators (Draft for Comment). These 2008 draft provisions appear to have lain dormant until recently. At an international competition seminar held by the AMB in September 2011, officials from the US DOJ and FTC were specifically invited to provide comments on their legislation and enforcement practice in relation to fast-track reviews, which was seen by many observers as indicating that introduction of such a mechanism is back on the agenda for the Chinese authorities.

This appears to have been confirmed by developments in early 2012, with indications that Mofcom has begun to adopt new internal review processes for deals meeting such criteria as very low individual (and overlapping, where relevant) market shares of the transaction participants. In regard to these cases, it is understood that Mofcom officials may no longer be required to undertake the same level of liaison with other government bodies as has previously occurred in relation to all deals, which should help to reduce the total review period for such cases.

Decision Statements

As mentioned earlier in this article, the level of detail in the AMB’s decision statements remains limited, although there does appear to be a gradual growth in the volume of information released with each published decision. It is hoped that this trend of improving transparency will continue throughout 2012, particularly as it is generally considered that the more detailed decision statements of the AMB provide evidence of its increasing sophistication and alignment with international best practice methodologies.

There is also some optimism that the AMB may begin to publish decision statements in relation to at least some deals that are cleared unconditionally. Although the Bureau is not required to do this under the AML, there are growing calls for more information about such deals—and in particular transactions which attract wide public attention (such as the recent Nestle/Tsui Fu Chi and Yum/Little Sheep mergers). At the very least, the release of some details about the parties or AMB’s views on the “relevant market” in such cases will be extremely helpful for business operators participating in future transactions in the relevant industry sectors.

A Level Playing Field for State-Owned Enterprises

Some observers may be unsettled by the fact that almost all conditional approval decisions made by the AMB to date have concerned M&A deals between foreign multinationals, with the Bureau yet to intervene in a purely domestic deal involving China’s state-owned enterprises (SOEs) and other domestic companies.

However, the recent conditional clearance decision relating to the proposed joint venture between GE (China) Co., Ltd. and China SOPE China Shenhua Coal to Liquid and Chemical Co., Ltd. (the latter being a China SOE) does provide some support for the continuing insistence by AMB officials that there is a level playing field for foreign and domestic businesses. In addition, the NDRC’s recent announcement of its anti-monopoly investigation into the two large SOEs in the telecommunications industry (China Telecom Corporation Limited and China United Network Communications Corporation Limited) is even more compelling evidence that SOEs will be accountable to the Anti-Monopoly Enforcement Authorities.

In this context, there is a feeling that it cannot be long before we see the first adverse merger control decision relating to a purely domestic transaction in China—notwithstanding that this type of decision would be sure to generate some concerns from within China’s political hierarchy.


In this current year of the dragon, signs abound that enforcement of the AML merger control regime is set to broaden in scope and impact. A broad framework of implementing rules relating to the regime is already in place, and several further important rules are nearing finalisation. As the AMB becomes more confident, both in its own decision-making and in the steps it has taken to communicate its expectations and approaches to the international business community, it can be expected to move forward in areas where it previously hesitated to act. In particular, businesses that fail to notify the AMB about deals that trigger the mandatory notification obligation now face an increasing risk of scrutiny and fines, and purely domestic transactions in China can expect to come under the same spotlight as foreign transactions. The AMB may also grow bolder in identifying concerns about notified deals, toward which the AMB’s current high clearance rates may suggest a degree of conservatism.

For the AMB, the time for caution may be ending—that duty now passes to the business operators whose deals it examines. As the dragon comes to prominence, a more ambitious approach to merger control enforcement in China seems likely, and it would thus be prudent for all business operators whose dealings may come under scrutiny in China to ensure they tread cautiously around the AMB’s lair.


1 Note that the AMB does not publish unconditional clearance decisions, and thus up-to-date statistics on the number of such decisions and the AMB’s unconditional clearance rate are only available when periodically released by Mofcom AML officials. At the time of writing, figures have only been announced regarding the period up to 1 August 2011.

2 Note that at the time of writing there has been one conditional clearance during 2012, concerning a proposed joint venture enterprise to be established by Henkel Hong Kong Holdings Co., Ltd. and Tiande Chemical Industry Co., Ltd.

3 National Development and Reform Commission.

4 State Administration of Industry and Commerce.

5 Federal Antimonopoly Service.