It has been two years since China established its merger control regime. How has it fared? With a new anti-monopoly law soon to be enacted, now may be a good time to take a look at the mainland’s report card.

It is still occasionally pointed out that China’s regime has an extra- territorial reach. Yes, it does, but that is consistent with international practice. If two foreign parties engage in a merger that has an effect on the market of a third country, it can be subject to merger control review in that jurisdiction.

To borrow the jargon of European Union legislation, a transaction outside China may be seen to have a “China dimension”. Where it does, compliance with the mainland’s merger control regime, in practice, has not been too onerous – administratively inconvenient but not a “show stopper”. Rather, the China regime has slotted rather unassumingly into typical multi-jurisdictional merger-control timetables.

There are various reasons. First, even though the law is silent on many issues, the authorities, helpfully, have followed approaches used elsewhere. For example, although the rules do not mention it, approval of a merger does not need to be stated but can be deemed to have occurred after the expiry of a waiting period. This has been very helpful in closing multi-jurisdictional deals.

Second, comparisons with elsewhere have been helpful in resolving many talked-about definitional problems, such as what is meant by “market” or whether the calculation of turnover includes value-added tax or intra-group sales. Where a party is making filings in various jurisdictions, it makes sense to have consistency in the concepts and definitions used.

For instance, in Philips NV’s disposal of its personal computer and television monitor business to China’s TPV, the European Commission did not disagree with the submissions that CRT and LCD monitors were part of the same market and that the monitor market need not be segmented according to screen size. The same views were expressed, using consistent definitions, to the China authorities.

Third, you get the sense of something “low key” about China’s merger- control regime. One reason must be that this is a learning period for everyone. There is no embarrassment here. As a leading authority in the UK noted after the EU regime was introduced, there was “a steep learning curve for all involved” while procedures that worked for officials, lawyers and clients were formulated.

All this is useful preparation for the new anti-monopoly law. But that is also a more ambitious project. It is an omnibus law that not only comprises merger control, but also independent mechanisms to counter cartels and abuses of dominant position.


The writer is the author of The Law and Practice of Mergers and Acquisitions in the People’s Republic of China, to be published by Oxford University Press in 2006, and a lawyer with Simmons & Simmons, Hong Kong

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