September 27, 2021

Volume XI, Number 270


September 24, 2021

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China’s Merger Control Rules

Whenever a deal (including joint venture) has a Chinese dimension, China’s pre-merger notification requirements need to be carefully considered.  There are low annual revenue thresholds of only +/- US $65 million (¥400 million) that trigger mandatory notification in China.  If the deal is not properly notified and cleared by the regulator before implementation, there is the potential for fines, orders to unwind the deal and compulsory sell off of assets and equity.

Under China’s Anti-Monopoly Law (AML) those entering into a merger or acquisition, or a joint venture, involving entities with significant business in China, may need to notify and obtain prior clearance from China’s Ministry of Commerce (MOFCOM).  Such notification and clearance is required depending upon:

  1. whether the transaction is a “concentration” (see further below), and
  2. whether the revenues of the parties in China and/or globally reach certain thresholds.

If a concentration may have the effect of eliminating or restricting competition, MOFCOM can either prohibit the transaction or attach conditions (remedies) before granting clearance.

If it can be shown that the concentration, even if it may restrict competition, (i) will lead to improvements in competition that significantly outweigh its adverse effects on competition, or (ii) is otherwise in the public interest, MOFCOM will not prohibit the concentration.

Up until December 2012, of more than 500 merger notifications, MOFCOM had blocked one concentration (i.e., acquisition of Huiyuan by Coca Cola) and imposed conditions in 16 others.

If prior notification of a concentration to MOFCOM is required, parties should not underestimate the considerable amount of information MOFCOM normally demands, and the time required to prepare, submit and guide the notification through the merger control process.


A concentration must be notified to MOFCOM if the following thresholds are met:


Special rules apply to the calculation of revenue thresholds for financial institutions.  Note that even if the applicable revenue thresholds are not met, MOFCOM nevertheless has authority to review a concentration if it might restrict or eliminate competition.


Under the AML a “concentration” of business operators is defined as:

  1. a merger of business operators;
  2. a business operator acquires control over another business operator by way of acquiring shares or assets of the latter; and
  3. a business operator acquires control over another business operator or becomes capable of exerting decisive influence over another business operator by way of contract or other means.

MOFCOM generally considers that newly formed Joint Ventures (JV) where the parties involved meet the revenue thresholds, should be notified and cleared.

MOFCOM Review Process

A concentration that falls within the above thresholds cannot be implemented until clearance from MOFCOM is obtained or the mandatory time limits have expired. There are strict time limits within which MOFCOM must either reject the notified concentration, or impose conditions (remedies) on a concentration. If MOFCOM makes no decision within the applicable time limits, the concentration may be implemented.  It should be noted however, that time does not start running until MOFCOM formally accepts a notification.

Those involved in a concentration are encouraged to engage in pre-notification consultations with MOFCOM as early as possible. In the pre-notification consultations MOFCOM will generally make an initial assessment on what information should be submitted in the notification. Once a notification has been accepted as complete, MOFCOM’s formal review process starts. This consists of:

  • a 30 day Phase I review,
  • a 90 day Phase II review, and
  • a 60 day Phase III review,  leading to a maximum of 180 days in total for all three phases.

Experience to December 2012 shows that MOFCOM’s review of most notifications is not completed until the latter part of Phase II.

Assessment of a Concentration

Factors MOFCOM must consider when reviewing a notified concentration are:

  • the market shares of the parties and their ability to control the relevant market;
  • the degree of concentration in the relevant market;
  • the influence of the transaction on market entry and technological progress;
  • the influence of the transaction on consumers and other business operators; and
  • the influence of the transaction on national economic development.

MOFCOM may also take into account other elements that could effect market competition.

Failure to Notify

If a business operator fails to comply with the mandatory notification requirements, MOFCOM may terminate and/or unwind the transaction, dispose of relevant assets, shares or businesses, and impose fines of up to ¥500,000 (+/- US $85,000). The transaction must be “suspended” during MOFCOM’s later review of a concentration if MOFCOM determines it should have been notified. 

© 2021 McDermott Will & EmeryNational Law Review, Volume III, Number 55

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