By Xiang Wang
On April 18, 2014, the Anti-Monopoly Bureau (“AMB”) of the Ministry of Commerce (“MOFCOM”) issued the Guidance on Filings of Simple Cases of Concentrations of Undertakings (Trial) (the “Guide”) in response to MOFCOM’s promulgation of the Interim Provisions on the Standards for Simple Cases of Concentrations of Undertakings (the “Standards”). The Standards were MOFCOM’s first major step towards a simplified merger control procedure, published two months earlier, which set out the substantive criteria for identifying simple cases that are unlikely to raise substantive competition concern. The Guide describes the simplified procedure. Although the AMB does not commit to approve the transactions qualifying as “simple cases” within a shorter timeframe as of yet, the AMB narrows the scope of information to be disclosed by the notifying parties.
I. Streamlined Disclosure under the “Simple Case” Treatment
A. Comparison with Disclosure for Non-Simple Cases
According to Article 4 of the Guide, a notifying party may prepare simple case filings by filling out the first attachment to the Guide, the Notification Form for Anti-Monopoly Review on Simple Cases of Concentration of Undertakings (the “Simplified Form”). The Simplified Form substantially reduces the amount of information which must be disclosed with regards to concerned undertakings, supply and demand structure in relevant markets, market entry, horizontal or vertical cooperative agreement, efficiency to be produced by the concentration, etc., in comparison to the standard form (the “Standard Form”) prescribed by the AMB on June 6, 2012. Please see table I-1 for a detailed comparison of disclosure requirements between the Simplified Form and the Standard Form.
B. Decreased Burden in Information Gathering Process
Among the streamlined information disclosure requirements, we believe that the following two do the most to reduce the workload of antitrust practitioners.
First, disclosure of affiliated entities of concerned undertakings in the Simplified Form is streamlined. The Simplified Form no longer requires disclosure of the shareholding structure of affiliated entities, easing the difficulty previously experienced when there are multiple levels of shareholders between the ultimate controller and a concerned undertaking, and also easing problems when intermediate shareholders are not wholly-owned. The Simplified Form also eliminates the requirement for submission of approval certificates and business licenses of domestic affiliated entities, which tends to be both time-consuming and burdensome when there are many sister companies under common control.
Second, the entire section regarding suppliers and customers of concerned undertakings is removed in the Simplified Form. This is preferable to the merging entities because information regarding suppliers and customers of concerned undertakings is sensitive, and they dislike being exposed to the possibility of unwanted disclosures, especially when other undertakings with shared control over target companies take the lead in the notification process. Additionally, the removal of the suppliers and customers section also eliminates the need to calculate supplies procured and products sold in each of the relevant product markets defined, which has always been troublesome due to the fact that a concerned undertaking’s accounting practice may not be easily adaptable to this process. For example, a lubricant manufacturer may need to spend substantial time determining how to separate out fungible items like base oil, which is ordinarily booked as a single item in their internal accounting records, into different categories like base oil used to produce vehicular lubricants and base oil used to produce industrial lubricants in order to fully identify and disclose information about the relevant product markets on the Standard Form. In this example, the fungible item is only used in two relevant product market categories; however, it is not uncommon for other fungible items to sometimes be used in many more relevant product market categories than this.
II. Procedural Aspects of the “Simple Case” Treatment
A. Application for the “Simple Case” Treatment
To make use of the streamlined procedural rules for review on simple cases, a notifying party must apply to the AMB to qualify the notifiable concentration as a “simple case” if the concentration meets the Standards. This can be done by simply filling out the Simplified Form and stating the reasons for invoking the simplified review procedure. If no such application is made, the Guide will not apply, and the notification must be made using the Standard From. The notifying party is recommended to take advantage of the opportunity to submit a written pre-filing consultation with MOFCOM to help determine whether a notifiable concentration would qualify as a “simple case” since MOFCOM has broad discretion for denying the “simple case” treatment under Article 3 of the Standards, and it would be an unfortunate waste of time making a re-filing under the regular rules for review on non-simple cases once the AMB denies the “simple case” treatment.
B. The Period for Public Challenges against the “Simple Case” Treatment
Submission of a filing by a notifying party through use of the Simplified Form results in issuance of a Registration Form for Information of Concentration of Undertakings by the Service Center on Administrative Affairs of MOFCOM; however this does not actually result in a formal certification that a filing has been submitted in accordance with Article 23 of the Anti-Monopoly Law (“AML”). This is probably because the amount of information required to be disclosed would significantly increase should AMB deny the “simple case” treatment. Rather, a notifying party is required to submit the second attachment to the Guide, which is a public announcement form (the “Announcement Form”), simultaneously with the Simplified Form, which will be made publicly available for ten days by the AMB once it decides to open the case, and which may be challenged by any third party as to the “simple case” treatment of this case by submitting evidence and contact details. If either evidence or contact details cannot be verified, the AMB will disregard the challenge.
C. Denial or Revocation of the “Simple Case” Treatment
The Guide permits AMB to revoke the “simple case” treatment at any time during the review process upon its determination that the case does not qualify for “simple case” treatment, provided that it also hears facts, reasons and evidence stated by the notifying party that it should be given the “simple case” treatment prior to its formal revocation. But it is also worth noting that if a notifying party conceals material information or provides false or misleading information, the AMB may require a notifying party to re-file under the regular rules for non-simple cases, and has the discretion to seek remedies for this behavior in accordance with Article 52 of the AML, which empowers the MOFCOM to impose fines of less than RMB20,000 on individuals, and fines of less than RMB200,000 on entities, or in serious cases, fines of up to RMB100,000 on individuals and fines of up to RMB1,000,000 on entities.
III. Conclusion
With the promulgation of the Guide, the AMB has created a new avenue for the PRC merger control process which reduces the amount of information to be provided for “simple cases” and sends a positive signal demonstrating its desire to improve the efficiency of the merger control filing process. It also significantly lessens the burden on concerned undertakings, especially those with complicated shareholding structure or multiple relevant product markets with overlapping suppliers and customers. We believe that this will not be the last procedural rule promulgated by MOFCOM related to review on “simple cases,” and expect that MOFCOM is likely to commit itself to a shortened timeframe for reviewing “simple cases” in the near future.
Table I-1 (this table is made by Xuehui Piao, a Beijing-based associate with Global Law Office):
