MOFCOM Clarified the Requirements for Notification of Simple Merger Cases

The merger control authority in the People’s Republic China ("PRC"), i.e. the Ministry of Commerce ("MOFCOM") issued the Interim Provisions on Criteria Applicable to Simple Cases of Concentrations of Business Operators ("Interim Provisions") on 11 February 2014. In our China Insight newsletter of February 2014, we reported on the key criteria applicable to the simple merger cases which the Interim Provisions introduce (please click here (http://www.cms-china.info/insight/2014/02/China-Insight-Competition_14-02-21.html) ). On 18 April 2014, the Anti-Monopoly Bureau of the MOFCOM ("Anti-Monopoly Bureau") further clarifies the requirements for notification of simple merger cases in the Guiding Opinions (Interim) on Notification for Simple Cases of Concentrations of Business Operators ("Guiding Opinions").

We would like to summarize the major content of the Guiding Opinions as follows:

Filing Documents

• Pursuant to the Guiding Opinions, the notifying party needs to submit the following documents and information (jointly “Filing Documents”) to the Anti-Monopoly Bureau if the notifying party believes that the transaction meets the criteria applicable to simple merger cases set out in the Interim Provisions:

1.  the simplified notification form ("Simplified Notification Form");
2.  the standard form for public announcement of a simple merger case ("Standard Form for Public Announcement");
3.  the transactional agreement;
4.  the financial accounting reports for the preceding financial year of the parties to the transaction as audited by their accounting firms;
5.  the certificate of identity or the certificate of incorporation of the notifying party;
6.  the power of attorney, if an agent is commissioned by the notifying party to submit the filing documents; and
7.  other documents and information required by the Anti-Monopoly Bureau on a case-by-case basis.

• The Anti-Monopoly Bureau published the templates of the Simplified Notification Form and the Standard Form for Public Announcement together with the Guiding Opinions. The Simplified Notification Form can be created via the client software which was developed by the MOFCOM. The client software is available at http://fldj.mofcom.gov.cn (http://fldj.mofcom.gov.cn/) .
• Like the existing notification form for normal merger cases, the Simplified Notification Form requires the information such as the names, domiciles and scopes of business of the parties to the transaction, a general introduction of the transaction and the proposed date on which the transaction will be implemented. In addition, the notifying party needs to specify the following market information in the Simplified Notification Form:

1. definition of relevant markets;
2. market shares of the parties in the relevant markets;
3. major competitors and their market shares; and
4. assessing the effect that the transaction will have on competition in the relevant markets.
5. However, unlike the existing notification form for normal merger cases, the notifying party of a simple case does not need to provide the following marketing information in the Simplified Notification Form:
6. supply and demand structure in the relevant markets;
7. analysis of the market entry;
8. information on the existing horizontal or vertical cooperation agreement;
9. efficiency analysis;
10. failing entity analysis; and
11. opinions of the relevant parties such as government authorities, competitors, suppliers, customers and media etc. on the transaction.

• Pursuant to the Guiding Opinions, the notifying party shall highlight the business secrets (if any) in the confidential version of the Filing Documents. A non-confidential version of the Filing Documents is submitted simultaneously together with the confidential version.

Filing Procedures

• Prior to the formal notification, the parties may request a pre-notification consultation with the Anti-Monopoly Bureau of the MOFCOM in order to clarify whether the transaction meets the criteria applicable to the simple merger cases set out in the Interim Provisions. Pursuant to the Guiding Opinions, the pre-notification consultation is not a mandatory procedure required for filing a simple case. The notifying party is allowed to notify the transaction to the Anti-Monopoly Bureau as a simple case without the pre-notification consultation.
• The Filling Documents need to be submitted to the Administrative Affair Service Center of the MOFCOM and the latter will forward the Filing Documents to the Anti-Monopoly Bureau. If in the opinion of the Anti-Monopoly Bureau the Filing Documents are not complete, the authority may request that the notifying party provide clarification and supplement missing information within a designated time limit.
• If upon review the Anti-Monopoly Bureau is of the opinion that the transaction meets the criteria applicable to simple cases set out in the Interim Provisions, the authority will open a file for the transaction. The statutory waiting period only commences after a file has been opened for the transaction. However, if the transaction does not meet the criteria, the Anti-Monopoly Bureau will request that the notifying party refile in accordance with the normal procedure.

Oppositions

• The Guiding Opinions introduce a new opposition procedure. I.e. after the Anti-Monopoly Bureau has opened a file for the transaction, the authority will post the Standard Form for Public Announcement on the website http://fldj.mofcom.gov.cn (http://fldj.mofcom.gov.cn/) . Pursuant to the Guiding Opinions, the period of the public announcement is 10 days ("Opposition Period").
• Any third party may file an opposition with the Anti-Monopoly Bureau within the Opposition Period and request that the authority withdraw acknowledgement of the transaction as a simple case. The third party is required to provide evidence and disclose its contact information to the authority so that the latter may verify the authenticity of the opposition and relevant supporting evidence.
• The Anti-Monopoly Bureau may withdraw the acknowledgement of the transaction as a simple case, if it discovers that the transaction does not meet the criteria set out in the Interim Provision. In the event of withdrawal, the notifying party has to refile in accordance with the normal procedure.

Revocation

• Pursuant to the Guiding Opinions, the Anti-Monopoly Bureau may revoke acknowledgement of the transaction as a simple case and order the notifying party to refile in accordance with the normal procedure, if the notifying party conceals material information or submits false or misleading information. Further, the authority may impose a fine of up to RMB 100,000 if the notifying party is an individual, and impose of a fine of up to RMB 1,000,000 if the notifying party is an enterprise pursuant to Article 52 of the PRC Anti-Monopoly Law.

The implementation of the Guiding Opinions is a sign of major progress of the simplified merger review mechanism in China. In particular, the Simplified Notification Form substantially reduces the burden of the notifying party to submit specific market information. However, unfortunately, it still remains unclear how long the Anti-Monopoly Bureau will take to clear a “simple case” in China. Further, the newly introduced opposition procedures bring about potential risks for re-filing, which may substantially delay the merger review procedure in practice. At the current stage, it would be advisable for the parties to the transaction to conduct a careful benefit-risk assessment before filing a formal notification for a simple case in China.