The Merger Control Review: China


The State Administration for Market Regulation (SAMR) is currently the sole antitrust authority for merger control in China. The SAMR's local offices at the provincial level may be empowered to take over certain types of merger control cases in the near future.

A pre-merger notification should be filed with the SAMR if the transaction meets the merger filing threshold as follows:

  1. the transaction constitutes a concentration of undertakings; and
  2. at least two undertakings concerned each have a turnover exceeding 400 million yuan in China in the previous financial year, and the combined turnover of all the undertakings concerned exceeded 2 billion yuan in China or 10 billion yuan worldwide in the previous financial year.

The SAMR has proposed major amendments to the current merger control rules. On 2 January 2020, the SAMR released a draft of amendments (the Draft Amendment) to the Anti-Monopoly Law of the People's Republic of China (AML), which proposes several extensive changes to China's merger control regime. On 7 January 2020, the SAMR released a draft of the Interim Provisions on Merger Review for public comment. The details of these legislative developments are discussed in Section II.

Year in review

i Enforcement

In 2019, the SAMR released public notices for 369 cases under the simplified procedure, cleared 96 cases under the normal procedure (including five cases cleared with conditions) and fined 16 cases for gun-jumping. Nearly 80 per cent of the filings were reviewed under the simplified procedure, and most of these simple cases were cleared in around 20 calendar days after being accepted as complete.

Conditional clearance

The SAMR conditionally cleared five cases in 2019 (KLA-Tencor/Orbotech,2 Cargotec/TTS,3 II-VI/Finisar,4 Zhejiang Garden/DSM5 and Novelis/Aleris).6

On the procedural front, all of these cases underwent the re-filing procedure (and Novelis/Aleris refiled twice), and the review time ranged from 210 days to 532 days. Because China has not established the 'stop-the-clock' mechanism and the statutory 180 days are not sufficient for reviewing complex cases, the re-filing practice allows the SAMR more time to reach its conclusion.

On the substantive front, the SAMR imposed hold-separate conditions in Cargotec/TTS and II-VI/Finisar. Although these cases raised substantial horizontal issues (the combined market share is 50 to 60 per cent in Cargotec/TTS and 45 to 50 per cent in II-VI/Finisar), they were not required to divest the overlapping businesses. In Novelis/Aleris, however, a divestiture condition was imposed on the parties' overlapping businesses, which had an even higher combined market share (70 to 80 per cent). The reason for the SAMR choosing the hold-separate remedy could be (1) there was promising market entry; (2) there was sufficient countervailing buyer power; (3) there was not a competent buyer for the divested business; or (4) the anticompetitive concerns were not substantial enough.

KLA-Tencor/Orbotech raised certain vertical foreclosure and conglomerate tying concerns, and the SAMR imposed behavioural conditions accordingly. In 2020, the SAMR imposed behavioural conditions in Infineon/Cypress7 and Nvidia/Mellanox,8 which demonstrates its approach for dealing with non-horizontal mergers, particularly those relating to sensitive sectors.


In the 16 gun-jumping cases, 15 cases involved the parties closing the transaction without notifying the SAMR, while in one case, the parties had submitted the notification but closed the deal during the waiting period.

According to the AML, the liabilities of gun-jumping include an administrative fine of up to 500,000 yuan and, when the transaction has severe anticompetitive effect, an administrative order requiring (1) termination of the merger transaction, (2) disposal of the shares or assets within the prescribed time limit, (3) assignment of business within the prescribed time limit, and (4) adoption of necessary measures to restore the status quo prior to the merger.

In the 51 gun-jumping cases publicised by the SAMR to date, none have been found to have adversely affected the market competition. In all cases, the parties were simply fined without receiving an administrative order to unwind the transaction. The range of fines imposed has been between 150,000 and 400,000 yuan. In the past two years, there has been a clear increase in fine amounts: all but one gun-jumping cases in 2019 were fined no less than 300,000 yuan. However, the risk of the transaction unwinding is still genuine and the SAMR will not hesitate to use this power to set a precedent when facing a case with significant anticompetitive effect. Furthermore, with the amendment of the AML, gun-jumping fines are expected to rise sharply.

ii Legislation

In January 2020, the SAMR released both the Draft Amendment and the draft of the Interim Provisions on Merger Review for public comment. These two pieces of legislation propose major revisions to the merger control regime.

Draft Amendment

China's antitrust authority has accumulated considerable experience with the nearly 3,000 merger filing cases that it has reviewed since 2008. Its experience shows that the current merger control regime does not function efficiently or effectively to prevent anticompetitive mergers and deter violations such as gun-jumping. The Draft Amendment aims, therefore, to reform, upgrade and strengthen the merger control regime.

The table below summarises all the major changes proposed to the merger control regime by the Draft Amendment.9

Proposed revisionsNotes
Stipulating the definition of 'control''Control' is the central concept of the merger control regime. Although current rules have provided a list of factors to assess when control is obtained, there is no definition or legal basis in the AML. In this regard, the Draft Amendment stipulates that 'control means the right or actual status of an undertaking(s), which directly or indirectly, solely or jointly has or may have decisive influence on the production and operation activities or other major decisions of another undertaking'.
Adjusting the merger filing thresholdCurrently, there is only a turnover-based filing threshold in China, and this threshold can only be set by the State Council. The Draft Amendment proposes to empower the SAMR to set and adjust the filing threshold based on economic development and industry size. This revision might envisage an increase to the current turnover threshold and supplement it with transaction size, market share or other types of filing threshold.
Launching the 'stop-the-clock' mechanismThe current rules do not provide a stop-the-clock mechanism. To allow the authority more time to review complicated filings, the current practice is for the notifying parties to withdraw and refile their cases one or more times. With the proposed 'stop-the-clock' mechanism, the statutory time limit of merger review can be suspended in the following scenarios:
  • upon application or consent by the notifying parties;
  • when the notifying parties are required to supplement materials; or
  • when the notifying parties are in negotiation with the antitrust authority on remedies.
The detailed rules of the stop-the-clock mechanism will be enacted separately by the SAMR.
Specifying the liabilities for providing incorrect or inaccurate informationMerger clearance based on incorrect or inaccurate information may be revoked. Providing false information may also result in heavy fines, which can be up to 1 million yuan for an individual or, for a company, up to 1 per cent of the violator's revenue in the previous year or up to 5 million yuan if there is no revenue or clear revenue record in the previous year.
Significant increase in fines for illegal concentrationIllegal concentration includes gun-jumping, breach of remedies, and concentration against decisions that block it. The fines for illegal mergers including gun-jumping have risen steeply, from the maximum of 500,000 yuan to the maximum of 10 per cent of the violator's revenue in the previous year.
Empowering authorities to investigate mergers that are below the filing threshold but have potential anticompetitive effectThis rule is not a new creation and it originates from the Regulations on Merger Filing Threshold by the State Council (2008). Nonetheless, it is the first time that such a rule will be included in the AML. The Draft Amendment also specifies that the SAMR has the power to impose conditions or unwind such mergers if they have or may have anticompetitive effects.

The Draft Amendment was initiated by the State Council's 2015 legislation plan and the Congress' 2018–2023 legislation plan. Earlier in 2020, the SAMR solicited public opinion of the Draft Amendment. Following this, the Draft Amendment, with further revisions, will be submitted to the Ministry of Justice (MOJ), which is the legislative body under the State Council. After review by the MOJ, the further revised amendment will be reviewed by the State Council, and then by the National People's Congress (NPC) or its Standing Committee (NPCSC). Once passed by the NPC or NPCSC, it will be enacted by a Presidential Order.

In view of the foregoing, the Draft Amendment is expected to be enacted by March 2023 at the latest, but the process could be accelerated significantly if there are few diverging opinions on its content. After the Draft Amendment is enacted, there would typically be a transition period of several months before it comes into effect.

Draft of the Interim Provisions on Merger Review

The draft mainly consolidates six merger control rules enacted in the time of the Ministry of Commerce of the People's Republic of China (MOFCOM, the previous Chinese antitrust authority in charge of merger control), which proposes few substantive changes. This SAMR rule is expected to be enacted in 2020, and it remains to be seen if any new rules will be adopted in the final version.

iii Strategic impact

2019 did not see as much enforcement on monopolistic agreements or abuse of market domination as previous years, yet the number of merger cases reviewed by the SAMR is no less than it was before. The merger control regime has always been a focus of the SAMR. It has accumulated rich enforcement experience in this area and is not afraid to make innovations in its enforcement tools. With the Draft Amendment drastically increasing the liability for violations of merger control rules, the number of merger notifications is expected to rise in the future.

iv Financial distress

According to the Interim Provisions on Assessment of Impact of Concentration of Undertakings on Competition, the SAMR should take into consideration whether the parties are facing impending bankruptcy in assessing the competitive influence of the transaction.

In addition, due to the covid-19 crisis, the SAMR has adopted several measures to alleviate certain difficulties the parties may encounter in the notification process. First, the SAMR has adopted electronic merger filing instead of hard copy submission, which has resulted in a noticeable reduction in the merger review process time. Second, an expedited review process is applied to the review of mergers: (1) in economic sectors closely related to people's daily lives and prevention of the disease, such as the manufacture of medical equipment, food production and transportation; (2) in economic sectors greatly affected by the pandemic, such as catering, accommodation and tourism; and (3) aimed at the resumption of work.

The merger control regime

i Waiting periods and time frames

Transactions under the Chinese merger control regime are subject to a standstill obligation. After the parties submit notification, there is a pre-acceptance stage in which the SAMR makes a preliminary review before formally accepting the filing and usually issues a written list of required supplementary materials. For cases under the simplified procedure, almost all questions or issues will be resolved at this stage. When the SAMR is satisfied with the supplementary materials, it will formally accept the notification as complete and it then begins the process of formal review.

The formal review includes three phases. Phase 1 review can last 30 calendar days at most, and cases under both the simplified procedure and the normal procedure need to go through this stage. Notifications under the simplified procedure are subject to a 10-calendar day publicity period. The publicity period usually starts upon the SAMR's formal acceptance and the time is included in the Phase 1 time period. If no third party raises an objection within the publicity period, the SAMR usually grants approval to simple cases in the Phase I review.

Phase 2 review can last up to 90 days. Notifications under the normal procedure usually need to go through this phase.

Phase 3 review can last 60 days at most. Notifications under the normal procedure with major competition concerns may need to be reviewed under Phase 3.

If the SAMR believes that the competition concerns cannot be fully analysed within the specified time periods, the parties may be required to withdraw the notification and refile.

ii Parties' ability to accelerate the review procedure

Normally there is no formal procedure to apply for an expedited review under the Chinese merger control regime. Nonetheless, adequate preparation and swift responses can help to effectively avoid time wasting. Communication with the SAMR about why the case is in urgent need for clearance would also help expedite the process. In addition, transactions that relate to the covid-19 pandemic, as discussed in Section II.iv, currently qualify for an expedited review process.

iii Third-party access to the file and rights to challenge mergers

The ability for third parties to access files and the rights to challenge mergers are different depending on the review procedure of the case.

For cases under the simplified procedure, any third party is entitled to challenge the merger during the publicity period. At the beginning of the 10-day publicity period, the SAMR will release the publicity notice, stating the name of the transaction, the concentrating parties, the relevant markets, the range of the parties' market shares in the relevant markets and the reason why the case is suitable for the simplified procedure. The public opinion received during this period is an important information source of factual knowledge for the SAMR and can materially influence its review of the merger. Notably, the Novelis/Aleris case, one of the five cases in 2019 that received conditional clearance, was originally filed under the simplified procedure, but the parties withdrew the case and resubmitted it under the normal procedure after a third party raised objections to it in the publicity period.

Cases under the normal procedure will not be subject to general public review, but the SAMR will seek opinions from the government departments in charge of the economic sectors to which the relevant markets belong, as well as from the industry associations in the relevant markets. The opinions of the government departments and industry associations are of great value to the SAMR, and it would not generally clear a case if it received objections from these parties. Undertakings affected by the transaction (generally, competitors of the notifying parties) can voice their views through the government departments or industry associations.

iv Tender offers and hostile transactions

There is no legislation or case law suggesting that tender offers and hostile transactions should be reviewed differently from other transactions. In both cases, the parties are obliged to submit the notification with the SAMR before the closing of the deal. In fact, some of the cases fined for illegal concentration related to tender offers. For example, in the GRAM/PanAust case,10 the deal was made by off-market public takeover bid. GRAM did not notify the Chinese antitrust authority before the transaction and was fined 150,000 yuan for gun-jumping. This would be rather complicated in terms of hostile transactions, as it is not generally feasible for the acquirer to make the notification without the cooperation of the target. Timing can also be a crucial matter in this situation. For hostile transactions, it is recommended that pre-notification consultation be arranged with the SAMR to seek an alternative solution.

v Resolution of authorities' competition concerns

When the authority has competition concerns about a transaction, it would ask the parties to propose remedies to resolve the concern. The parties can also voluntarily provide proposals of remedies before the SAMR asks for these. When the review takes longer than normal and the parties know the concentration might have an adverse effect on competition, the parties should consider submitting remedy proposals.

If the SAMR and the stakeholders are satisfied that the proposed remedies would effectively address the competition concern, the SAMR would clear the case with restrictive conditions. According to the Rules for Imposing Restrictive Conditions on the Concentration of Undertakings (for Trial Implementation), the remedies can be imposed by the antitrust authority, and can cover both structural and behavioural remedies, including (1) divestiture of tangible assets, intellectual property and other intangible assets, or related interests, and (2) opening up networks or platforms and other infrastructure, licensing key technologies (including patents, know-how or other intellectual property rights), and terminating exclusive agreements, etc.

If the SAMR is not satisfied with the proposed remedies, it will consult with the parties, assess the effectiveness, feasibility and timeliness of the proposals and advise the parties of its opinion of these. The negotiation could proceed for several rounds and is time consuming. If the parties know that their transaction could have serious anticompetitive effects, it is recommended that preparations are made beforehand.

If the parties do not submit a proposal or the proposed remedies do not fully address the concerns of the authority, the SAMR will prohibit the transaction. To date, only two cases have been prohibited by the SAMR; however, there have been cases in which the parties have abandoned transactions for being unable to satisfy the authority's requirements. For example, in 2015, Applied Materials Company and Tokyo Electron Company abandoned their merger deal because they could not fully resolve the competition concerns of the antitrust authorities in China and other jurisdictions.

vi Appeals and judicial review

If the SAMR decides to prohibit a transaction or impose restrictive conditions, the relevant parties can apply for administrative reconsideration by the SAMR's Department of Regulations.

The administrative reconsideration is a review conducted by the authority's legal department on whether the issued decision was lawful and appropriate. An administrative reconsideration decision will be made after the legal department reviews the original decision. If it finds that the original decision is not lawful or appropriate, the legal department will make suggestions about how the authorities should have handled the matter.

The Department of Regulations' functions include: (1) organising the drafting of laws and regulations related to market supervision and management; (2) reviewing the legality of regulatory documents and drafts of international cooperation agreements and protocols; (3) undertaking the design of law enforcement procedures, and standardising discretion and administration enforcement supervision work in accordance with laws and regulations; (4) undertaking or participate in relevant administrative reviews, administrative responses and administrative compensation; and (5) organising and carrying out publicity and education on the rule of law.

If the relevant parties are not satisfied with the administrative reconsideration decision, or if the original decision relates to another matter (i.e., fines for gun-jumping), the parties can bring an administrative litigation against the SAMR before the Beijing No. 1 Intermediate People's Court. If the relevant parties refuse to accept the Court's judgment, they have the right to file an appeal before the Beijing Municipal High People's Court.

In most circumstances, the original decision will continue to be executed while the administrative reconsideration and litigation are taking place.

vii Effect of regulatory review

The SAMR is the sole authority responsible for reviewing merger cases. However, for cases under the normal procedure, as discussed in Section III.iii, the government department relevant to the case may provide its opinion of the transaction to the SAMR. The clock does not stop when the SAMR seeks third-party opinion, and the process can be quite time consuming.

Other strategic considerations

i How to coordinate with other jurisdictions

China has signed more than 50 international cooperation agreements with jurisdictions including the United States, the European Union, Germany, Russia, South Africa and Brazil. The Chinese antitrust authority has established good communication channels with authorities in other jurisdictions and has cooperated with other authorities in more than 10 major international merger cases.

The open communication between the SAMR and other antitrust authorities mainly results in two consequences for the parties. First, the SAMR may sometimes take into consideration the decisions of other authorities in reviewing merger cases and vice versa. The decision the parties receive in one jurisdiction may echo that in another jurisdiction, thereby creating a global effect for the parties. It is therefore recommended that when the parties negotiate restrictive conditions with one authority, it is important to consider the potential impact on its business or transaction if similar decisions are made in other jurisdictions. Second, it would be difficult to make the notification to one authority but 'hide' it from the others to which a notification should be made, or to make an inconsistent filing in terms of market definition and competitive analysis. A global notifiability assessment is therefore recommended to parties that have business in more than one jurisdiction.

ii How to deal with merger notifications with variable interest entity structure

The legality of the variable interest entity (VIE) structure is quite ambiguous under Chinese laws and regulations. Before the SAMR took on the responsibility for merger review, it was under the jurisdiction of MOFCOM, which is also the authority that reviews and approves foreign investment. As MOFCOM would not validate a VIE structure by reviewing a merger notification involving such arrangement, it refused to accept such notifications. This practice has not changed much since the SAMR took over merger review responsibility. However, recently, the SAMR released public notice of a case in which one of the parties has a VIE structure.

Whether this means that the SAMR is now completely open to VIE notification is not clear, but it sends out the signal that gun-jumping risks for VIE transactions have sharply increased.

Outlook and conclusions

i Legislation

The SAMR completed soliciting public opinion of the Draft Amendment at the end of January 2020, and it is now going through several phases of review by different authorities. It is expected to be enacted by March 2023 at the latest, but the process could be accelerated. There is likely to be a transition period of several months before it comes into effect.

For the draft of the Interim Provisions on Merger Review, the SAMR received 160 comments during the opinion-seeking period. The SAMR is currently making further revision of the draft and will release another version at a later stage.

ii Unresolved issues

Whether the SAMR has completely opened the door for VIE-structure notifications, is merely tolerating certain types of VIE transition notification or the recent acceptance of notification involving a VIE structure was simply a careless error demands clarification from the authority. It also remains to be seen how the SAMR will deal with historical VIE cases that were unable to make notifications when they perhaps should have.

Similar to the EU, China is also considering introducing a transaction value-based filing threshold to capture transactions involving potential platform giants in the digital economy. Also, how big data will be treated in merger review remains to be tested.


1 Jet Deng is a senior partner and Ken Dai is a partner at Dentons.

9 Jet Deng and Ken Dai, 'China to Amend the Anti-Monopoly Law and Reform the Merger Control Regime', (last accessed 9 May 2020).

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