PRC Provides Filing Thresholds for Business Concentration in China

Definition of Concentration
Under Article 20 of the Law, concentration of operators refers to the following situations :-
(i) merger of the operators;
(ii) an operator acquires the controlling interest of other operator(s) through acquiring its shareholding or its assets;
(iii) an operator acquires the controlling interest or is able to exert influence on the decision of another operator(s) through contractual arrangement etc.
Article 21 of the Law requires the operator to file for approval with the relevant anti-monopoly enforcement organization if the degree of concentration will exceed the filing standards set by the State Council. Otherwise, such concentration should not be implemented. The Regulations aim to provide further details on the filing thresholds in addition to Article 21. These thresholds will become an important issue in transactions involving merger, acquisition or one entity taking control of another entity in PRC.
Detail thresholds for filing
Under Article 3 of the Regulations, if the concentration of the operators reaches any of the following thresholds, the filing obligation to the MOFCOM will be triggered :-
(i) during the financial year preceding the concentration, the aggregate worldwide turnover of all of the companies involved in the transaction exceeded RMB 10 billion and the turnover of at least 2 of the operators exceeded RMB 400 million in the financial year preceding the concentration; or
(ii) during the financial year preceding the concentration, the aggregate turnover in China of all of the companies involved in the transaction exceeded RMB 2 billion, and the turnover of at least 2 of the operators exceeded RMB 400 million in the financial year preceding the concentration.
Area for Clarification
Further clarification is required on the calculation of turnover, especially whether the turnover of its subsidiary or affiliated companies of the operators will be included, although the Regulations provide that the calculation of turnover should take into account the actual circumstances of the specific industries such as banking, insurance, securities and futures (and the authorities will promulgate further specific rules in these areas).
Under Article 4 of the Regulations, even if the concentration has not exceeded the above thresholds, the MOFCOM reserves the right to investigate if the evidence collected according to the prescribed procedures shows that such concentration may have the effect of excluding or restricting competition. The MOFCOM shall clarify whether any voluntary filing is advisable.
If you have any question about the above Regulations or the Anti-Monopoly Law or other issues on foreign direct investments, joint ventures, mergers and acquisitions in Mainland China, experienced lawyers in our China Business Department will be happy to assist you.
ABOUT THE AUTHOR: Angela Wang & Co
Angela Wang regularly advises major international clients including well known Fortune 500 companies on a wide range of corporate matters including the takeover of listed companies, IPOs, substantial asset restructuring, capital fund raising, cross border private equity transactions and structured financing in Hong Kong China and South East Asia. She also acts for China state owned enterprises and Chinese domestic companies and entrepreneurs in their various investments overseas. Ms Wang is a regular speaker in legal conferences for corporate counsel and business chambers in Hong Kong, Singapore and China.