Anti-Monopoly Law and Mergers in China: An Early Report Card on Procedural and Substantive Issues

AuthorDeborah Healey
Deborah Healey
The Anti-Monopoly Law of the People’s Republic of China
(“AML”) prohibits mergers and acquisitions (“concentrations”)
which lessen competition. This article examines the relationship
between the AML merger provisions and China’s industrial policy.
It also examines MOFCOM (Ministry of Commerce) merger
determinations to date in relation to market definition and
assessment of competitive impact. The article concludes that the
interpretation of the AML and the intentions of the regulator remain
unclear in a number of respects. At a procedural level,
MOFCOM’s determinations contain insufficient information and
analysis to draw the conclusion that MOFCOM is applying standard
competition analysis.
The political and economic environment of China is complex.
The legal system has been developing swiftly since its renaissance in
the early 1990s. China’s first comprehensive competition law, the
Anti-Monopoly Law, was passed on 30 August 2007 by the National
People’s Congress and came into effect on 1 August 2008. The
AML includes prohibitions on mergers and acquisitions, known as
“concentrations”, which lessen competition. It applies to
acquisitions by both foreign and domestic corporations.
Notification is mandatory over specified turnover thresholds. A
number of Guidelines and draft guidelines have been issued by the
Ministry of Commerce (“MOFCOM”), the nominated regulator, to
aid in the operation and interpretation of the AML provisions.1
Senior Lecturer, Faculty of Law, the University of New South Wales.
1 Guowuyuan Fanlongduan Weiyuanhui Guanyu Xiangguan Shichang Jiedingde Zhinan (ഭ࣑䲒
৽පᯝငઈՊޣҾ⴨ޣᐲ൪⭼ᇊⲴᤷই) [Guide of the Anti-monopol y Committee of the State
Council on Definition of the Relevant Market] (promulgated by the St. Council May 24 2009, effective
May 24 2009) 2009 ST.COUNCIL GAZ., 14; Jingyingzhe Jizhong Fa nlongduan Shencha Banshi Zhin an
(㓿㩕㘵䳶ѝ৽පᯝᇑḕ࣎һᤷই) [Working Guidance for Anti-Monopoly Review on Concent ration
of Business Operators] (promulgated by the Mi nistry of Com., Jan. 5 2009, effective Ja n. 5 2009), article/xgxz/200902/20090206034057.html?3522 922240=2320678451;
Shangwubu Fanlongduanju Guanyu Jingyingzhe Jizhongshenbao de zhidao yijian (୶࣑䜘৽පᯝተޣ
Ҿ㓿㩕㘵䳶ѝ⭣ᣕⲴᤷሬ᜿㿱) [Guiding Opinions of the Anti-monopoly Bureau of the Mini stry of
This paper examines the new regime in the context of its
commercial, political and legislative background to examine two
main issues. The first is the relationship between the merger
provisions of the AML and China’s strong industrial policy,
particularly the way in which the AML is applied to State-Owned
Enterprises (“SOEs”). The AML contains a number of provisions
which provide flexibility and discretion in enforcing the law against
government bodies and SOEs, as well as a number of provisions
which recognize various dimensions of industrial policy and its
interaction with competition law. The relationship between
industrial policy and competition will be critical to the success of the
AML as a comprehensive competition law, and continuing
examination of this issue is important. The six determinations in
which MOFCOM gave conditional merger approval discussed below
all involved offshore foreign transactions, while the one prohibition
also discussed below, involved the acquisition of a prominent
Chinese company by a foreign company.2 No merger involving
purely Chinese interests has been made subject to conditions or
prohibited. 3 It has, however, been suggested that delay by
MOFCOM in determining the Sina Corp acquisition of Focus Media
FMNC.O, involving two State Owned Corporations (and possibly
arising from reluctance to approve the deal), was the reason for the
demise of the deal. 4 During the same time period, many
Commerce on Declaration Documents an d Materials of the Concentration of Business Operators]
(promulgated by the Ministry. of Com., Jan. 5 2009 , effective Jan. 5 2009) 2009ST.COUNCIL GAZ., 1;
Jinrongye Jingyingzhe Jizhong Shenba o Yingye’e Jisuanbanfa (䠁㶽ъ㓿㩕㘵䳶ѝ⭣ᣕ㩕ъ仍䇑㇇࣎
) [Rules on Calculating Turnover concernin g Concentration; Notification of Financ ial Operators]
(promulgated by the Ministry of Com., Banking Reg. Comm., the Sec. Reg. Comm., the Ins. Reg.
Comm., the People’s Bank July 15 2009, effect ive Aug. 15 2009) 2009 ST.COUNCIL GAZ., 14;
Jingyingzhe Jizhong Shenba o Banfa ( 㓿㩕㘵䳶ѝ⭣ᣕ࣎⌅) [Measures for the Undertaking
Concentration Declaration ] (promulgat ed by the Ministry of Com., Nov. 21 2009, effective Jan. 1
2010) 2010 ST.COUNCIL GAZ., 16; Jing Ying Zhe Jizhong Shencha Zanxing Banfa (㓿㩕㘵䳶ѝᇑḕ
Ჲ㹼࣎⌅ (ᖱ≲᜿㿱は)) [Tentative Measure for the Undertaking Concentration Examination (drafted
for comments)] (promulgated by the Ministry of Com., Jan. 1 2009, effective Jan. 1 2010),; Shangwubu Guanyu Shishi
Jingyingzhe Jizhong Zichan Huoyewu Bolide Zanxing Guiding (୶࣑䜘ޣҾᇎᯭ㓿㩕㘵䳶ѝ䍴ӗᡆ
ъ࣑࢕⿫ⲴᲲ㹼㿴ᇊ) [Interim Regulations on Implementin g the Divestiture of Assets or Busines ses
in the Concentration of Business Op erators] (promulgated by the Min istry of Com., July 5 2010,
effective July 5 2010) 2010 ST.COUNCIL GAZ.41.
2 Coca Cola and Huiyuan Juice, discussed below.
3 See Competition Law Development in East Asia: A month in review , NORTONROSE (Aug. 2010), owledge/publications/2010.
4 See, e.g., Sina, Focus Media drop $1.4B merger plan, CHINA DAILY (Sept. 28, 2009), n/china/2009-09/29/content_8750122.htm; Melanie Lee, UPDATE 2 Sina,
Focus Media drop merger plan, REUTERS, 8;
Melanie Lee, China Sina, Focus merger application incomplete, REUTERS (July 16 2009),; Sina-Focus Media Deal Done in by Anti-Trust
Authority?, CHINA STAKES (Oct. 26 2009), http://chinast -media-deal-done-
concentrations of SOEs (several of which are noted below) have
occurred without apparent notification.
The second part of the paper reviews the written merger
determinations issued by MOFCOM in respect of mergers to date.5
It considers MOFCOM’s approach to market definition, and
MOFCOM’s analysis of the effect of the proposed mergers on
competition, to determine whether MOFCOM has complied with the
AML, with its own guidelines and with international competition law
The paper concludes that while there has been some progress by
the regulator in implementing the new rules governing mergers, there
are a number of areas in which both the interpretation of the AML
and the intentions of the regulator remain unclear. There is a lack
of procedural clarity in the application of the provisions at two
levels. At the policy level, it is too early to see any real trends on
the issue of the relationship between competition policy and
industrial policy, although there is significant flexibility in the AML
and indications provide some evidence of less than equal application
to government and SOEs compared to foreign companies. At the
procedural level, MOFCOM’s determinations contain insufficient
information and analysis to allow for proper critical analysis of the
regulator’s approach to important issues, so it is difficult to
understand whether standard competition analysis has been applied.
These are very important issues for companies wishing to
participate in markets in China. More information from MOFCOM
in its determinations and guidance on the relationship between
industrial policy and competition policy would significantly increase
the level of confidence of foreign corporations investing in China
and carrying on business there.
Foreign investment restrictions had been implemented prior to the
AML, most recently in 2006 to “safeguard fair competition and the
economic security of the state”.6 The restrictions applied to foreign
in-by-anti-trust-authority.html (Alternatively, the delay may have been caused by inefficient processing
of the notification. Whatever the rea son, the deal did not go ahead).
5 The author is grateful to Juan Chen, PhD. student in th e Faculty of Law at the University of New
South Wales for her translation of five of the original MOFCOM determinations. Individual
determinations are discussed in some depth as official translations were not available in all cases at the
date of writing. MOFCOM has no obligation to provide written determinations where mergers are
6 See Guanyu Waiguo Touzizhe Binggou Jingnei Qiyede Guiding (ޣҾཆഭᣅ䍴㘵ᒦ䍝ຳ޵Ա
ъⲴ㿴ᇊ) [Interim Provisions on the Takeover of Domestic Enterprises by Foreign Investors] (2006)
(promulgated by the Ministry of Com., the St. Admin. of Foreign Exchange, the St. -owned Assets
Supervision. & Admin. of St. Council, the St. Admin. of Tax’n, the St. Admin. for Indus. & Comm., the

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT