(Aug. 27, 2008) On August 1, 2008, the Chinese Anti-Monopoly Law (AML) entered into force. The law, dubbed “the constitution for the market economy,” was promulgated by the Standing Committee of the National People's Congress on August 30, 2007, after 14 years of debate. (AML, 6 STANDING COMM. NAT'L PEOPLE'S CONG. GAZ. 517-523 (P.R.C.) (2007), in Chinese.)
Two days after the AML took effect, on August 3, 2008, the State Council published the long-waited merger control filing thresholds: the Rules on Filing Thresholds for Concentrations of Undertakings (Filing Thresholds Rules) (Chinese text available on the Central People's Government of the People's Republic of China official website, http://www.gov.cn/zwgk/2008-08/04/content_1063769.htm (last visited Aug. 25, 2008)). A “concentration” under this law is defined as: (i) a merger among undertakings; (ii) the acquisition of control through acquiring shares or assets;or (iii) the acquisition of the ability to exercise decisive influence. (AML, art. 20.) Under the AML, concentrations that trigger certain thresholds must file an application with the anti-monopoly enforcement authority. (AML, art. 21.) The 57-article law, however, provides just major principles of the new merger control regime, and leaves the State Council to set up the thresholds. Under the Filing Thresholds Rules, transactions that meet either of the following two alternative turnover thresholds will be subject to a filing obligation under the new regime:
(i) The total worldwide turnover of all parties to the transaction in the previous fiscal year exceeded RMB10 billion (approximately US$1.46 billion), and the China turnover of each of at least two parties to the transaction exceeded RMB400 million (approximately US$58.4 million);
(ii) The total worldwide turnover of all parties to the transaction in the previous fiscal year exceeded RMB2 billion (approximately US$292 million), and the China turnover of each of at least two parties to the transaction exceeded RMB400 million (approximately US$58.4 million).
(Filing Thresholds Rules, supra, art. 3, translated by the author.)
Disappointing to many, the Rules retain one provision that gives the anti-monopoly enforcement authority the discretion to review a concentration that does not meet the turnover thresholds set out above; namely, where the authority considers the transaction is likely to result in the “elimination or restriction of competition” (art. 4). The Rules recognize the specific circumstances of the industries of banking, insurance, securities, and futures, which are subject to special rules that will be published by the Ministry of Commerce (MOFCOM) in consultation with other relevant authorities under the State Council (art. 3).
It is worth noting that the Rules clarify that the “anti-monopoly enforcement authority” in charge of merger control filing is the MOFCOM (art. 3). There is no provision detailing the structure of the anti-monopoly enforcement authorities in the AML, which may be viewed as an acknowledgement of the concurrent enforcement of the AML by three existing government departments: the National Development and Reform Commission (NDRC), the State Administration of Industry and Commerce (SAIC), and MOFCOM. Of the three authorities, only SAIC has expressly published its approved functions in anti-monopoly enforcement. (Jingying Zhe Jizhong Shenbao Biaozhun Chutai [Rules on Filing Thresholds for Concentrations Published], CAIJING, Aug. 4, 2008, available at http://www.caijing.com.cn/2008-08-04/110002440.html.)
Another step in implementation of the AML is the establishment of the National Anti-Monopoly Commission. The AML entitles the State Council to set up an anti-monopoly commission to organize, coordinate, and supervise anti-monopoly-related activities (AML, art. 9). Xinhua News Agency reported on the day that the AML entered into force that the National Anti-Monopoly Commission had been established recently. (Guowuyuan Chengli Fanlongduan Weiyuanhui [The State Council Sets Up the National Anti-Monopoly Commission], XINHUA, Aug. 1, 2008, available at http://news.xinhuanet.com/newscenter/2008-08/01/content_8898773.htm (in Chinese).) The major functions of the Commission include studying and formulating competition policies, organizing investigation and assessment of the overall competition situation of the market and issuing assessment reports, formulating and issuing anti-monopoly guidelines, coordinating anti-monopoly law enforcement, etc. (AML, art. 9.) The detailed structure and the official start day of the Commission have not been announced. The working rules of the Commission are reported to be waiting for State Council approval. (CAIJING, supra.)