Tag:corporate-mergers-and-acquisitions-antitrust-and-competition-law
On January 26, 2024, the State Council published the Provisions of the State Council on the Standard for Notification of Concentration of Business Operators (2024 Amendment) (“New Thresholds for Notification ”). The New Thresholds for Notification was passed by the State Council on December 29, 2023 and would take effect on January 26, 2024. Please see below a few highlights of the New Standard of Notification.
I. Turnover Thresholds are Significantly Increased
The New Thresholds for Notification has significantly increased the turnover thresholds for merger filings. Specifically, concentration that meets the following thresholds shall be notified to and cleared by the State Administration for Market Regulation (“SAMR”) prior to closing: [1]
It is worth noting that the draft for public consultation of the New Thresholds for Notification introduced a set of notification standard that targeted killer acquisitions. Specifically, a transaction that satisfies the following conditions will need to be notified to SAMR:
- The Chinese turnover of one of the concentrating parties exceeds RMB 100 billion (approx. USD 14.19 billion/ EUR 13.08 billion) in the preceding fiscal year; and
- The market capitalization (or valuation) of the merging party or the target company is not less than RMB 800 million (approx. USD 113.53 million/ EUR 104.68 million), and its turnover in China in the preceding fiscal year accounted for more than one-third of its global turnover.
The published version of the New Thresholds for Notification has not adopted the above thresholds, which might be because there are controversies over how to determine the market capitalization or valuation of an enterprise, and therefore whether a concentration has met filing thresholds would be uncertain. Nevertheless, the above thresholds reflect SAMR’s strict scrutiny over “killer acquisitions” in China, which are also consistent with the global trend.
II. Transactions that do not Meet Filing Thresholds but may Exclude or Restrict Market competition may also be Subject to Merger Filings
The New Thresholds for Notification emphasizes that if there is evidene to prove that a concentration of undertakings has or may have the effect of excluding or restricting competition, antitrust enforcement administration could require that such concentration be notified even if it has not met the filing thresholds as promulgated by the State Council.[2]
In determining which circumstances could be deemed as having the effect of excluding or restricting competition, the Antimonopoly Guidelines in the Field of Platform Economy (“Guidelines for Platform Economy”) and the Antimonopoly Guidelines in the Field of Active Pharmaceutical Ingredients (“Guidelines for API”) published and implemented in 2021 have provided the following guidance:
III. Application Time
The New Thresholds for Notification will apply to transactions for which the agreements are signed after January 26, 2024. For transactions signed before January 26, 2024 but are not yet implemented, there has not been a formal guidance on the applicability of the new standard. We would suggest a case-by-case assessment and a pre-filing consultation with SAMR if necessary.
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Article 3, New Thresholds for Notification.
Article 4, New Thresholds for Notification .
Article 19(3), Guidelines for Platform Economy.
