Looking back and Looking forward after Three Years of Antitrust Enforcement in China (Experts)

• Author: Peter J. Wang et al

China's antimonopoly law ("AML") came into effect in August 2008, after more than a decade of consideration. Even if China's antitrust regime is still in its infancy, it is increasingly a significant concern for Western companies, particularly given the lack of transparency surrounding the antitrust agencies and the resulting unpredictability.

On the merger review side, China rapidly has become a significant regulatory obstacle for both Chinese and global M&A transactions. Relatively low turnover thresholds require many transactions to be filed in China, even if there is little connection to China, and the increasingly long timeframe to obtain approval has delayed closing numerous cross-border deals. The introduction of a national security review system for the acquisition of domestic companies or assets may add yet another layer of difficulty. (Following are some significant developments in AML enforcement since its entry.)

Merger Control: The AML has introduced a mandatory premerger approval process for any transaction that involves parties of a certain size. These thresholds are relatively low, starting at US$63 million of revenues in China for each party to the transaction. Hence, any global merger of two, even offshore, companies with minimal sales in China is reportable under the AML.

Timeframe for MOFCOM Approval: The pre-acceptance phase (the phase preceding the formal acceptance of the case, during which MOFCOM may ask follow-up questions) has significantly expanded, from two to four weeks on average. It is not uncommon for merging parties to have to respond to two sets of additional questions from MOFCOM before the notification is deemed complete and the 30-day phase I period can start. The number of additional rounds of questions in the pre-acceptance phase does not seem to be correlated to the level of detail...