This month, important amendments to the Chinese Anti-Monopoly Law (AML) came into force. Implementing regulations are now being finalized which will provide further detail on each set of changes.1 The Chinese antitrust regulator, the State Administration for Market Regulation (SAMR), has concurrently proposed higher revenue thresholds for merger filings, with the final text expected by the end of this year.
After the new revenue thresholds are implemented, SAMR will have to be notified of a transaction if either: 1) the Chinese turnover of each of at least two of the parties to the concentration is over RMB 800 million (US $117.9 million) (formerly RMB 400 million (US $58.9 million)) and 2) there is a combined worldwide turnover of all the parties to the concentration of over RMB 12 billion (US $1.8 billion) (formerly RMB 10 billion (US $1.5 billion)); or the combined Chinese turnover of all the parties to the concentration is over RMB 4 billion (US $589.4 billion) (formerly RMB 2 billion (US $294.7 billion)).
Additionally, a new hybrid threshold is to be added to tackle so-called "killer acquisitions," where an incumbent firm acquires a competitor at an early stage of its development to "kill off" its competitive innovative product or technology. Under this threshold, SAMR will need to be notified of a merger if: 1) the Chinese turnover of one party to the concentration is over RMB 100 billion (US $14.7 billion), and 2) the other party to the concentration has a market value over RMB 800 million (US $117.9 million) and its Chinese turnover is over one-third of its total turnover. Furthermore, SAMR will now be able to review transactions below these thresholds if it believes there is evidence that they are anti-competitive. If a transaction has not already closed, once SAMR calls it in the parties cannot close until they receive clearance from SAMR. If a transaction has already closed, the parties must cease implementation or take other measures necessary to restore competition.
In short, raising the thresholds will make more deals non-reportable in China, will reduce the filing burdens for merging parties generally, and is a welcome development for parties engaged in M&A activity in the country. SAMR's greater ability to intervene in transactions may create more uncertainty for dealmakers, particularly in sectors in which the regulator takes a keen interest. Nevertheless, the requirement for a clear nexus to China when this power is to be used should help to define the boundaries of SAMR's jurisdictional reach, and it should also be welcomed. Merging parties will need to carefully analyze whether their transaction has any Chinese nexus, and if so, prepare for a potential call-in by SAMR.
[1] See the State Administration for Market Regulation’s drafts “Notification Thresholds Rules” and “Merger Review Rules,” which correspond to the revision of the two existing merger control implementation regulations, respectively: The Rules of the State Council on the Notification Thresholds for Concentration of Undertakings, and The Rules on the Review of Concentrations of Undertakings.
