MOFCOM fast-tracks anti-monopoly reviews

The authority has yet to decide on the threshold level ofmarket share, but Shang Ming, director of MOFCOM's Anti-monopoly Bureau, saidthat it would not be very high, according to a report by ChinaDaily.

Henry Chen of MWE China Law Offices said: “Whether anapplication can take advantage of fast-track procedures all depends on theaccurate determination of relevant markets.” Chen estimated that more than halfof the transactions are likely to be eligible for fast-track procedures.

However, the threshold for qualifying mergers is stillconsidered too restrictive based on the Herfindahl-Hirschman Index (HHI), acommonly used calculation to measure business concentration, according toStephen Harris of Baker & McKenzie, who was quoted in Law360.Although the fast-track process is similar to the EU's simplified mergerprocess, its proposed timeline is much longer than the EU's, which offersdecisions within 25 days.

The draft proposal classifies cases into three categories:simple, normal and major, each of which are subject to varying timeframes. Theseclassifications will be defined by the combined market share and HHI (see tablebelow).

*After MOFCOM formally accepts the merger application

The size of the deal, industry sectors and categorisation ofmarkets are all relevant factors. For example, to define 'product market' in theacquisition of a beer manufacturer, the relevant market would become larger iftaking into account additional beverage products such as fruit juice. Likewise,it would become smaller if only limited to alcoholic drinks. There is also ageographical market, which varies according to the scope and location of themarket.

“It is like a tagging war. The premise is that you have todefine accurately what constitutes relevant market. The authorities would thendecide whether your case could be assessed under the fast track process,” said Shanghai-basedChen.

“More haste, less speed,” he added. “If the determination isdoubted, the review process could take even longer than the normal process.”

Harris, in the same report on Law360,said that combined market share exceeding 20% is unlikely to presentcompetitive concerns, but many of these cases would be categorised into majorcases.

Consultant Gerry O'Brien of Mayer Brown JSM believed thatmany transactions were normally between competitors in one or more markets, andit would be rare for companies to only have a combined market share of under10% in a relevant market.

In addition, when the HHI scores trigger a major case reviewat 1,500, it is often taken as an indication of a 'moderately concentratedmarket'. Reviews will still be subject to the pre-merger notification procedure.For example, if pre-merger notification takes 30 days, the proposal wouldresult in a 60-day review (30 days for pre-notification and 30 days forreview).

MOFCOMpublished its revised application form for anti-monopoly review on June 6.Market observers view it as a positive sign that the authority is cognisantthat improvements need to be made.

By Janice Qu

Further reading:

Provisions on Several Issues Concerning the Application of the Law in Trials of Civil Dispute Cases Arising from Monopolistic Acts 
关于审理因垄断行为引发的民事纠纷案件应用法律若干问题的规定

SPC releases first interpretation of the Anti-monopoly Law