August 7, 2008
The Chinese State Council has adopted new implementing regulations regarding the notifiability of mergers in China. The regulations were published on 4 August 2008, but came into force on 3 August 2008.
The regulations set out the following notification thresholds:
a. the global turnover in the previous accounting year of all business operators to the combination exceeded 10 billion RMB (approx. Euro 940 million / US$1.46 billion), and at least two participants to the combination had respectively generated turnover of more than 400 million RMB (approx. Euro 38 million / US$59 million) in China in the most recent complete accounting year; or
b. the turnover in China for the previous accounting year of all business operators to the combination exceeded 2 billion RMB (approx. Euro 188 million / US$292 million), and at least two participants to the combination respectively generated turnover of more than 400 million RMB (approx. Euro 38 million / US$59 million) in China in the most recent complete accounting year.
These thresholds will require notification when the parties generate materially lower amounts of Chinese revenue than was previously the case (although they are slightly higher than the figures proposed in the drafts). However, there are no longer market share-related thresholds or a threshold related to the number of Chinese entities controlled by the parties to the transaction.
The regulations are materially shorter than the various drafts (five articles, three substantive, down from 19 articles). As a result, a number of the anticipated changes to notification procedures have not occurred. For example, the draft regulations contemplated giving examining officers a discretion to terminate the 30 working day waiting period early if they formed the view that the transaction would have no obvious impact on competition. As a result, the 30 working day waiting period remains in place, with no mechanism for shortening the review period.
Unfortunately, the implementing regulations are silent in relation to the regulatory body (or bodies) with jurisdiction to review merger notifications. However, Chinese counsel is advising that notifications should continue to be filed with MOFCOM, until the ongoing negotiations between the various institutional stakeholders are resolved.
Gibson, Dunn & Crutcher lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn attorney with whom you work or David Wood (+32 2 554 7210, email@example.com) or Miranda Cole (+32 2 554 7201, firstname.lastname@example.org) in the firm’s Brussels office, Peter Sullivan (212-351-5370, email@example.com) in the New York office, or Jai Pathak (+65 6622 5977, firstname.lastname@example.org) in the Singapore office.
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