China’s publication of threshold figures for competition clearance is welcome. But most of the draft law’s clarity has been left out.
The final implementing regulations for concentrations under the new Anti-Monopoly Law were published on Sunday and comprise five articles. A draft was published in March that had 19 articles.
“We have five very short articles that say what a concentration will be, but in very brief terms. And then they set out the thresholds,” said Kirstie Nicholson, of counsel at Lovells in Shanghai. “A lot of the articles in the draft went into detail about the practical filing process, but they have got rid of them all.”
No one knows whether joint ventures are covered or how to calculate turnover. Article 3 refers to “all undertakings involved in the concentration” (or “all business operators to the concentration” depending on the translation used), so does that include the seller?
“In Europe, you wouldn’t normally look at the seller when calculating whether the threshold has been met. You look at the buyer and the target. If the Chinese authorities intend the seller to be included, a lot more transactions are likely to be caught,” said Nicholson.
In addition, the draft proposed that all documents must be translated into Chinese. Feedback from the industry suggested that only the key documents and annexes should be translated, but the final regulations offer no comment. If the authorities insist on everything being translated, international companies will face added cost and delays.
“They haven’t clarified everything that they could’ve clarified,” said a competition lawyer in Hong Kong. “Companies will look at this regulation and have no legal certainty whether they need to notify.”
As a result, China’s Ministry of Commerce (Mofcom), which will monitor the filing process, will have to make the process efficient.
“It may be that further guidance becomes available and that Mofcom is extremely helpful,” says the competition lawyer. “We may find that when you call them up, you get a clear answer. We’ll have to wait and see.”
Mofcom has an important role to play in setting precedent, and therefore legal certainty. It would be useful for the regulator to publish reasoned decisions once it has handled important cases. There has been no indication to confirm or deny such action. But lawyers are calling for some kind of public statement.
“Companies don’t want the burden of going at least part way into a notification process before getting a clear answer that says: ‘actually, we don’t think you need to notify at all’,” said Nicholson. “That would be frustrating for companies.”