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SAMR gets tougher on Gun Jumping


Under PRC competition law, undertakings shall notify the anti-monopoly enforcement authority, i.e. since March 2018 the Anti-Monopoly Bureau of the State Administration for Market Regulation (“SAMR”), of transactions reaching the notification threshold (“Concentrations”). Further, without having obtained clearance granted by the SAMR, no implementation of the Concentrations is permitted, i.e. undertakings have an obligation not to implement or close a Concentration until it is cleared (“Standstill Obligations”) by the SAMR.

As such, the PRC adopts mandatory pre-merger notification coupled with Standstill Obligations. Pre-merger notification and Standstill Obligations shall prevent a potentially negative impact of transactions on the market and possible harm to competition. Violations of the obligation to notify a Concentration and of the Standstill Obligations are commonly called “gun jumping” and are subject to the legal consequences mentioned in Item 2 below.

According to the publicly available information (“Public Information”) on the website of the SAMR as of 27 November 2019, there have been 14 gun jumping cases which have been investigated and fined by the SAMR in 2019. The number of gun jumping cases and amount of fines have been increased significantly since SAMR has taken charge in March 2018.

Relevant PRC Laws and Regulations

a) Pre-merger Notification

According to Article 21 of the Anti-Monopoly Law of the People’s Republic of China (“AML”), undertakings shall notify the SAMR of Concentrations reaching the notification threshold. The Concentrations shall not be implemented before such notification is conducted.

The notification threshold is triggered if either (i) the total worldwide turnover of all the parties to the Concentration in the previous financial year exceeded RMB 10 billion (approx. EUR 1,300,000,000) and the turnover in China of each of at least two parties to the Concentration in the previous financial year exceeded RMB 400 million (approx. EUR 52,000,000); or (ii) the combined turnover in China of all parties to the Concentration in the previous financial year exceeded RMB 2 billion (approx. EUR 260,000,000) and the turnover in China of each of at least two of the parties to the Concentration in the previous financial year exceeded RMB 400 million (approx. EUR 52,000,000).

b) Standstill Obligations

According to Articles 25 and 26 of the AML, before the clearance is granted by the SAMR after their submission of the notification documents, undertakings shall refrain from implementing the Concentrations.

In other words, according to the Standstill Obligations, during the period between (i) notification of the Concentration is submitted to the SAMR by undertakings and (ii) the clearance is granted by the SAMR, a Concentration shall not be implemented or closed.

Legal Consequences of Gun Jumping

a) Administrative Penalties

According to Articles 48 and 49 of the AML as well as Article 13 of the Interim Measures for Investigating and Handling Failure-to-Notify Concentrations, in the event of violations of pre-merger notifications or Standstill Obligations, the SAMR may:

(1) Order the termination of the Concentration;

(2) Order the disposal of the relevant shares/assets within the prescribed time limit;

(3) Order the assignment of relevant business within the prescribed time limit;

(4) Order the adoption of necessary measures to restore the status quo prior to the Concentration;

(5) Impose a fine of up to RMB 500,000; or

(6) Take other necessary measures.

In practice, so far the SAMR only imposed fines. No publicly accessible record shows that so far also other administrative penalties have been imposed.

b) Civil Liability

According to Article 50 of the AML, undertakings that carry out monopolistic conduct and, thus, cause losses to others shall bear civil liability.

If the parties to a Concentration close a deal prior to getting the clearance from the SAMR, the validity of the concerned Concentration agreement (SPA or joint venture contract, etc.) cannot be secured, especially under the circumstances where the concerned Concentration agreement has the effect of eliminating or restricting competition.

As such, should the Concentration agreement turn out to be invalid, parties to the Concentration may be subject to civil claims from any party which suffers economic losses in addition to the administrative penalties imposed by the SAMR.

c) Reputational Loss

In addition to the legal consequences as provided for under PRC law, since the SAMR (it was the Ministry of Commerce, one of the competition authorities, before 1 March 2018) from 1 May 2014 has published on its website its administrative decisions on gun jumping cases, parties to a Concentration may also suffer reputational damages in addition to the economic losses and (symbolic) fines imposed by the SAMR.

Overview of Gun Jumping Cases in 2019

Below is a brief overview of the 14 gun jumping cases sanctioned in 2019.

a) Types of Concentrations Involved

Among the 14 gun jumping cases, four cases were about establishment of new joint ventures and 10 cases were about share transfer deals.

b) Number of Gun Jumping Cases and Range of Fines

(1) According to the Public Information of the SAMR, since 1 May 2014 (when the Ministry of Commerce decided for the first time to publish its administrative decisions regarding gun jumping, etc. on its website), the number of gun jumping cases has been rising significantly: from only one gun jumping case in 2014, four cases in 2015, six cases in 2016, six cases in 2017 to 15 cases in 2018.

(2) According to the Public Information, fines imposed by the SAMR in the majority of gun jumping cases before 2019 were RMB 150,000 (approx. EUR 19,500). Fines in the majority of gun jumping cases of 2019 were RMB 300,000 (approx. EUR 39,000), with the smallest fine being RMB 200,000 (approx. EUR 26,000) and the largest fine being RMB 400,000 (approx. EUR 52,000).

Under PRC law, fines imposed on undertakings in gun jumping cases are symbolic, i.e. they should be less than RMB 500,000 (approx. ERU 65,000). According to the Pubic Information of the SAMR, no fines imposed by the SAMR have yet reached RMB 500,000 (approx. EUR 65,000). However, the Pubic Information shows that the amount of fines has been increased considerably in 2019.

Therefore, the SAMR has been gradually taking aims at gun jumping and it seems to take a tougher line towards gun jumping since 2018.

c) Application of Two Year’s Statutory Limitation

(1) Two Year’s Statutory Limitation

According to Article 29 of the Law of the People's Republic of China on Administrative Penalties (Revised in 2017), where an unlawful act is not discovered within two (2) years of its commission, an administrative penalty will not be imposed, except as otherwise prescribed by PRC law.

The period of time prescribed in the preceding paragraph shall be counted from the date the unlawful act is committed; if the act is of ongoing or continuous, the date shall be counted from the date on which the act ends.

(2) According to the Public Information, the two year’s statutory limitation seems not have been applied in some gun jumping cases.

For example, in its decision of 28 April 2019, the SAMR fined both Praxair (China) Investment and Nanjing Refinery RMB 300,000 (approx. EUR 39,000) each for failing to notify the establishment of their joint venture back in 2013.

We assume that the two year’s limitation did not apply, because the AMB had already started investigations within the two years period and such limitation was, therefore, interrupted.


As can be seen from the increased number of and increased amount of fines in gun jumping cases in both 2018 and 2019, the SAMR takes a tougher stand on gun jumping. Parties to Concentrations may also suffer economic losses or reputational damages (or both) in gun jumping cases. Therefore, parties to a Concentrations should consider carefully whether the concerned transactions are notifiable under PRC competition law. If this is the case, they should conduct pre-merger notification and then abide by the Standstill Obligations under PRC law until the Concentration has been cleared by the SAMR.

SAMR gets tougher on Gun Jumping
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Aiping Bao