Coming soon: fast-track reviews

    July 12, 2012 | BY

    clpstaff &clp articles

    The Ministry of Commerce has proposed to streamline anti-monopoly reviews by classifying M&A transactions based on market share


    Due to its lengthy review procedures, MOFCOM has been criticised for unnecessarily delaying transactions and increasing transaction costs and risks. To counter these concerns and to make its procedures more efficient, the Ministry has been considering proposals for singling-out unproblematic cases for a fast-track review.

    So far, MOFCOM has not officially published a draft of the regulation. However, sources reveal that an internal draft has been circulated according to which transactions will be classified in simple, normal and major cases based on criteria such as market share and the Herfindahl-Hirschman Index with different review timelines set for each type (see figure 1). According to this draft, a simple case should be completed in Phase I. However, the threshold to qualify for a simple case under the draft is set relatively high compared to the regimes in the US or the EU. The present draft also indicates that MOFCOM would include industrial or political considerations to determine the type of a case. For example, a transaction will be deemed a major case if it involves the acquisition of well-known trademarks or time-honoured brands (granted by the Ministry of Commerce to enterprises whose brands have stood the test of time and are widely recognised) or if it concerns industries with restrictions for foreign investment.

    Figure 1: Classification categories

    Categories

    Simple cases

    Normal cases

    Major cases

    Timeframe

    Decision within 30 days (Phase I) *

    Decision within 30 days (Phase I) or within 75 days (first half of the Phase II 90-day period) *

    Decision within 120 days (Phase II) or within 180 days (Phase III) *

    Horizontal concentration

    The combined market share is less than 10%; or the HHI after con-centration is less than 1000;

    The combined market share is more than or equal to 10% but less than 20%; or the HHI after concentration is more than or equal to 1000 but less than 1500;

    The combined market share is more than or equal to 20%; or the HHI after concentration is more than or equal to 1500;

    Vertical or mixed con-centration

    The relevant market share is less than 20%

    The relevant market share is more than or equal to 20% but less than 30%

    The relevant market share is more than or equal to 30%

    *After MOFCOM formally accepts the merger application

    Last but not the least, an amended filing form published by MOFCOM took effect on July 7, 2012. Even though MOFCOM did not issue a form applicable to simple cases, the revised form provides welcome clarifications and streamlines the practice of the regulator. However, the amended form includes certain obligations that could further increase the burden and costs of the transaction parties, especially by requiring the submission of an extensive range of sensitive information.

    Perhaps once a fast-track review system is launched MOFCOM will introduce a simplified filing form similar to the Short Form CO in the EU. Without a simplified form, the newly amended form will continue to be a heavy burden on the transaction parties.

    By Michael Dietrich, Maria Hou and Johnny Zhao, Taylor Wessing

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