Professor Farmer explains in the abstract to the essay::
Below are the Introduction and Background sections:Under the 2008 Anti-Monopoly Law of China (AML), the Ministry of Commerce (MOFCOM) is responsible for reviewing proposed concentrations that meet transaction-size thresholds. It has reportedly processed more than 450 transactions, issuing 16 conditional approvals and prohibiting one proposed concentration, applying factors such as market shares, concentration, entry, competitive effects, and national economic development, among others. On April 3, 2013, MOFCOM published draft “Interim Regulations on Standards Employed for Simple Mergers” seeking public comments. The draft identifies various scenarios that may or may not be classified as simple cases and four open-ended circumstances in which simple case status may be revoked. The standards for simple case classification include market share thresholds and several effects-based standards. This article analyzes the Interim Regulation, compares the current and proposed European Commission and US FTC and DOJ procedures for expedited review, and identifies some open questions not directly addressed by the current draft. The paper was published in the June 18, 2013 Competition Policy International, CPI Asia Column. (Farmer, Susan Beth, MOFCOM Publishes Interim Regulations on Standards for Simple Mergers and Requests Public Comments (June 27, 2013). Penn State Law Research Paper No. 16-2013).
MOFCOM Publishes Interim Regulations on Standards for Simple Mergers and Requests Public Comments
Professor of Law & International Affairs McQuaide Blasko Faculty Scholar
Penn State Law School
Under the 2008 Anti-Monopoly Law (AML) Articles 20-31, The Ministry of Commerce (MOFCOM) is responsible for reviewing proposed concentrations that meet transaction-size thresholds. The statute sets out a general list of relevant factors including market shares, market concentration, effect on market access, technological progress, consumers, business operators, national economic development and “other factors that may affect the market competition.”1 These broad standards have been supplemented by market definition guidelines and guidelines on competitive impact analysis, among other guidelines and regulations.2 While the MOFCOM staff is reportedly relatively small,3 since the effective date of the AML, it has reportedly reviewed more than 450 notified concentrations, issued 16 conditional approvals and prohibited one proposed transaction.4 Most recently, on April 3, 2013, MOFCOM published a Draft set of Interim Regulations on Standards Employed for Simple Concentrations of Business Operators for public comment. In response to the invitation, the ABA Sections of Antitrust and International Law submitted comments on May 16.5
There are approximately 100 jurisdictions with competition laws worldwide and many of them review proposed transactions and prohibit the transaction from closing until the review has been completed, so-called suspensive merger-control systems. In the absence of an agreement to defer to a primary jurisdiction, this system gives the last reviewing jurisdiction the ultimate power to delay the acquisition. It is generally recognized that most mergers are pro-competitive or competitively neutral, so multiple, lengthy reviews can frustrate competitive transactions. Additionally, the investigation of complex transactions requires significant agency staff time, expertise and funding. The European Commission and the US agencies have adopted different approaches to expedite approval of non-problematic concentrations, thus freeing agency resources for the cases that present real competitive issues.
These Interim Regulations are in the tradition of longstanding procedures employed by the European Commission (“the Commission”) and US DOJ Antitrust Division and Federal Trade Commission (FTC) for expedited merger review in under certain circumstances. The Commission noticed a simplified procedure for speedy review of transactions in 20056 and is currently engaged in a consultation to update and revise some of the provisions of the procedure.7 The US FTC and DOJ have long responded to requests for early termination of reported transactions under the Hart-Scott-Rodino Act. Any party may request early termination before the HSR waiting period has expired and reported statistics indicate that requests were made in more than 76 percent of transactions reported in 2012, and more than 82 percent of the requests were granted.8
The AML, like many other merger review regimes, requires parties to a “consolidation” to file pre-merger notification if their transaction exceeds certain triggers detailed in MOFCOM notification regulations.9 After the completed materials have been filed and the notification has been accepted, the parties are required to wait pending MOFCOM review. AML Articles 25 and 26 establish a 3-phase review period of 30, 60 and 90 days respectively, not including delays. This schedule has, in some cases, exceeded a year.10 As in all suspensive merger review jurisdictions, the parties may not conclude their transaction until after it has been approved or the time period for the review has expired.
There is international consensus that competition agencies should devote their resources to focus on serious threats to the competitive process. In the merger realm, the International Competition Network recommends that the purpose of merger reviews should be to identify, prohibit or impose remedies only on concentrations that are likely to significantly harm competition.”11 In commentary, the ICN recommends that agencies adopt an analytic framework to distinguish between concentrations that threaten competitive harm and those are likely to be neutral or pro-competitive. It is an ICN Guiding Principle for Merger Notification and Review that merger review should be efficient, timely, and effective,”12 and agencies should promulgate procedures to “provide enforcement agencies with information needed to review the competitive effects of transactions and should not impose unnecessary costs on transactions. The review of transactions should be conducted, and any resulting enforcement decision should be made, within a reasonable and determinable time frame.” The ICN recommendations and best practices were generated by the consensus of the member competition agencies and, while they do not have the status of statutory law, they are essentially soft law and deemed persuasive in many jurisdictions.
1 AML Art. 27.
2 Yee Wah Chin, Merger Control Under China’s Anti-Monopoly Law, Legal Risk for China Investments, E.4.2 2http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2187147 (last visited June 8, 2013).Other guidelines include pre-merger notification procedures, draft merger remedy rules, and national security review of acquisitions by domestic enterprises by foreign investors.
3 Michael Martina, INSIGHT – Flexing Antitrust Muscle, China is a New Merger Hurdle, (May 2, 2013) (stating that “people familiar with MOFCOM’s anti-monopoly bureau ... say it has only 10-12 case handlers, and all deals have to go through a pre-notification phase conducted by a department with just five people.”), available at http://uk.reuters.com/assets/print?aid=UKL3N0DJ0I220130502
4 Yee Wah Chin, Merger Control Under China’s Anti-Monopoly Law, Legal Risk for China Investments, E.4.2 Dividing Point Investment Management (January 2013), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2187147 (last visited June 8, 2013).
5 Comments of the American Bar Association Section of Antitrust Law and Section of International Law on the MOFCOM Draft Interim Regulation on Standards Applicable to Simple Cases of Concentrations of Concentrations of Business Operators (May 16, 2013), available at http://www.americanbar.org/content/dam/aba/administrative/antitrust_law/at_comments_simple_20130516.authchec kdam.pdf (last visited June 8, 2013).
6 Commission Notice on a simplified procedure for treatment of certain concentrations under Council Regulation (EC) No 139/2004 (2005/C 56/04) Official Journal C 56, 05.03.2005, p. 32-35, available at http://eur- lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52005XC0305(03):EN:NOT (last visited June 8, 2013).
7 Commission Notice of XXX on a simplified procedure for treatment of certain concentrations under Council Regulation (EC) No 139/2004, available at http://ec.europa.eu/competition/consultations/2013_merger_regulation/draft_revised_simplified_procedure_en.pdf (last visited June 8, 2013); Public Consultations: EU merger control – Draft revision of simplified procedure and merger implementing regulation, available at http://ec.europa.eu/competition/consultations/2013_merger_regulation/index_en.html (last visited June 8, 2013).
8 Federal Trade Commission and Department of Justice, Hart-Scott-Rodino Annual Report FY 2012, 35th Annual Report, Appendix A, available at http://www.ftc.gov/os/2013/04/130430hsrreport.pdf (last visited June 8, 2013). Appendix A indicates that during FY 2012, 1,429 transactions were reported, there were 1,094 involved requests for early termination, 902 requests were granted, and 192 requests were not granted.
9 Measures on the Notification of Concentrations Between Undertakings; and Measures on the Review of Concentrations Between Undertakings (2009).
10 Michael Martina, INSIGHT – Flexing Antitrust Muscle, China is a New Merger Hurdle, (May 2, 2013), available at http://uk.reuters.com/assets/print?aid=UKL3N0DJ0I220130502
11ICN Recommended Practices for Merger Analysis, Recommendation 1A, available at http://www.internationalcompetitionnetwork.org/uploads/library/doc316.pdf (last visited June 9, 2013). The recommendation provides that “the purpose of competition law merger analysis is to identify and prevent or remedy only those mergers that are likely to harm competition significantly.”
12 ICN Guiding Principles for Merger Notification and Review (Jan. 7, 2010), available at http://www.internationalcompetitionnetwork.org/uploads/library/doc591.pdf (last visited June 9, 2013) Principle #5 provides that “[t]he merger review process should provide enforcement agencies with information needed to review the competitive effects of transactions and should not impose unnecessary costs on transactions. The review of transactions should be conducted, and any resulting enforcement decision should be made, within a reasonable and determinable time frame.”