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On June 24, 2022, the new Anti-Monopoly Law
邓志松/Jet Deng, 戴健民/Ken
Business operations involve a large number of M&A
transactions. The completion of M&A transactions depends on the
fulfillment of a series of legal and government regulatory
conditions, one of the most important regulatory conditions being
the antitrust scrutiny. The AML borrows the term
“concentration of undertakings” from EU Competition Law
to refer to M&A transactions in the context of antitrust
scrutiny, while in the case of companies and their attorneys, it is
referred to as “merger filing of concentration of
undertakings”. With the growing maturity of China’s
antitrust law enforcement, merger filing has become a key legal
procedure affecting M&A.
On June 27, 2022, in order to thoroughly implement the amended
AML, the SAMR issued the Provisions of the State Council on the
Threshold for the Declaration of Concentration of Undertakings
(Exposure Draft for Revision) and the Provisions on the
Review of Concentration of Undertakings (Exposure Draft)
(hereinafter collectively called “the Exposure
Drafts”), which substantially amend the existing
merger filing system. This article will provide a comprehensive
explanation of the merger filing system based on the core content
of this amendment, with a view to providing practical guidance for
corporate M&A transactions.
- Overview of the main amendment of the Exposure Drafts
The amendment of the Exposure Drafts is mainly reflected in the
- Raising the turnover criteria of conventional active filing:
the requirements for global aggregate turnover, aggregate turnover
in China and unilateral turnover in China are raised from the
existing RMB 10 billion (same currency below), 2 billion and 400
million to 12 billion, 4 billion and 800 million respectively.
- Two types of non-conventional filing criteria added: for the
concentration of transactions of large enterprises, as well as the
concentration of transactions that do not meet the turnover
criteria, the Exposure Drafts added provisions of the circumstances
under which filings are required.
- Clarifying that provincial administrations of market regulation
can review the merger filings in accordance with the commission;
the SAMR can, according to the needs of work, entrust the
provincial administrations of market regulation to implement the
review of the concentration of undertakings.
- Clarifying the characterization of control: the Exposure Drafts
summarize the past practical experience and clarify that the
characterization of control should take into account voting rights
or similar rights, executive appointments, financial budgets,
business plans, etc.
- Clarifying the application of a differentiated review approach
for the classification and grading system: for concentration of
undertakings in important fields related to national security and
people’s livelihood, the SAMR may develop specific review
approaches and conduct graded review based on different types of
- Clarifying the filing procedures for transactions that do not
meet the criteria: if the turnover does not meet the criteria
listed above, but there is evidence that the transaction has or may
have the effect of eliminating or restricting competition, the SAMR
may, after verification, require a filing or remedial filing from
the enterprise, and the enterprise has a statutory obligation of
filing based on the requirements of the SAMR. For transactions that
have been implemented at this time, the SAMR may require the
enterprise to stop until the review is completed. If the enterprise
fails to notify as required, the SAMR may launch an investigation
of illegal concentration.
- Clarifying the detailed rules for the application of the
“stop-the-clock” procedure; the Exposure Drafts provide
further refinement of the application of the
“stop-the-clock” procedure in three circumstances, (1)
for failure to provide information on time, the SAMR shall notify a
deadline for correction in writing; for failure to provide on time
again, the calculation of the review period can be suspended, (2)
for the emergence of significant new circumstances, new facts, and
the review cannot be continued without verification, the SAMR can
suspend the calculation of the review period, and the enterprise
has the obligation to take the initiative to report on the new
circumstances and new facts, (3) for the need of assessment of the
restrictive conditions, it should be based on the application of
enterprises, and suspend the calculation of the review period.
- Clarifying the characterization of “implementation of
concentration” (closing): In addition to formal
concentration, the Exposure Drafts clarify the closing including
substantive concentration, such as the assignment of senior
managers, actual participation in business decisions and
management, exchange of sensitive information, substantive
integration of business, etc.
- Clarifying the characterization of the time point: on one hand,
for the time point of turnover calculation, it clearly refers to
the last fiscal year of the date of signing the concentration
agreement; on the other hand, for the time point of turnover
calculation in the legal liability of illegal concentration, it
clearly refers to the last fiscal year of the date of the illegal
implementation of the concentration.
- It is clear that for those who take the initiative to conduct a
remedial filing, the SAMR shall give a lighter or mitigated
administrative penalty according to Article 32 of the
Administrative Penalty Law.
- What kinds of transactions need a merger filing?
In accordance with the new AML and the Exposure Drafts, there
are three circumstances triggering the submitting of a merger
filing to the SAMR.
- Conventional active filing: in M&A transactions where the
combined turnover of the concentrating parties in the previous year
exceeds RMB 4 billion (within China) or RMB 12 billion (worldwide),
and at least two concentrating parties have a turnover of more than
RMB 800 million within China.
- Non-conventional active filing: one concentrating party has a
turnover of more than RMB 100 billion in China in the previous
year, the market value (or valuation) of the other concentrating
parties is no less than RMB 800 million, and more than one-third of
the turnover of the latter is generated in China.
- Non-conventional passive filing: when the turnover does not
meet the above criteria, but there is evidence that the transaction
has or may have the effect of eliminating or restricting
competition, the SAMR may require the enterprises to notify.
Conventional filing is the most common kind which accounts for
the largest proportion of filings, while non-conventional filings
(whether active or passive) account for a relatively small
proportion. However, in the context of the Central Government’s
request to “strengthen anti-monopoly and prevent disorderly
expansion of capital” and the SAMR’s special attention
to mergers and acquisitions that “pinch off young
shoots”, non-conventional filings will be subject to more
- At what time point should the merger filing be submitted?
M&A transactions are required to be notified after the
agreement is signed and before the transaction is closed, and no
substantive closing action is allowed before the approval is
obtained. As to what is “closing”, the Exposure Drafts
clearly include not only formal operations, such as registration of
shareholding changes, obtaining of business licenses, etc., but
also substantive concentration, such as the appointment of senior
managers, actual participation in business decisions and
management, exchange of sensitive information with other
undertakings, and substantive integration of business.
This rule of the Exposure Drafts imposes higher compliance
requirements for the transitional arrangements of the transaction.
In order to avoid substantive concentration of transactions before
approval, it is recommended that companies set up clean teams to
exchange only necessary information, conduct compliance review of
transaction arrangements/integration steps, and introduce antitrust
attorneys early in the agreement drafting process to work on
- To what authority is the merger filing submitted?
Currently, the sole authority to review merger filings in China
is SAMR. According to the Exposure Drafts, the SAMR may, according
to the needs of work, entrust provincial administrations of market
regulation to implement the review of concentration of
undertakings. Therefore, in the near future, in addition to the
SAMR, some provincial administrations of market regulation may also
become the body to review merger filings. In recent years, the SAMR
has repeatedly seconded personnel from local administrations of
market regulation to conduct review of filing cases, which has laid
the foundation for local authorities to conduct review of
At the same time, it should be noted that the Exposure Drafts
only arrange for the implementation of “review” of
concentration by the provincial administrations of market
regulation. Therefore, the administrative investigation of illegal
concentration will probably continue to be processed by the
- Will there be any legal liability if the filing is not
In accordance with the provisions of the new AML and the
Exposure Drafts, enterprises that fail to take the initiative to
notify their transactions according to law will face the following
- General transactions: a fine of up to RMB 5 million for a
- Transactions with competitive impairing effect: a fine of up to
10% of the previous year’s sales for a single enterprise, and
the transaction needs to be restored to its original state,
including stopping the implementation of concentration, disposing
of shares or assets for a limited period, and transferring business
for a limited period.
- Not meeting the filing criteria, but required to notify: It
should be noted in particular that if the transaction does not meet
the filing criteria, but is required to be notified by the SAMR
after the transaction is implemented, at this time, the SAMR may
require the enterprise to stop implementing the concentration until
the review is completed. In order to avoid the forced suspension of
business operations, it is recommended to fully assess and make
advance arrangements for competition issues before the transaction
which may have an impact on competition, even if the turnover size
of the enterprise is relatively small.
The new AML has significantly increased the legal liability for
illegal concentrations, while the Exposure Drafts specify that for
those who take the initiative to conduct a remedial filing, the law
enforcement authority should give a lighter or mitigated
administrative penalty as appropriate. Considering that such
illegal acts of not filing in accordance with law will not
terminate due to the closing of the transaction, but may be
regarded as ongoing and continuously illegal, the risk of
administrative punishment will exist for a long time, it is
recommended that enterprises take the initiative to conduct
remedial filings of the past unfiled transactions in a timely
- How long does it take to obtain approval for merger
The time required for merger filing varies depending on the
review procedures and the circumstances of the case. In terms of
the statutory review stage and deadline, the filing review process
includes three stages with a statutory deadline of 30, 90 and 60
days respectively (all natural days). Among them, the summary
procedure filing cases can generally be approved within the first
For general procedure cases with competitive effect, the review
may take longer than the above 180-day time limit. To address this
issue, the new AML has introduced the “stop-the-clock”
procedure, which provides for the suspension of the review period
under certain circumstances. The Exposure Drafts further clarify
that if the enterprise fails to provide supplementary information
in a timely manner, the SAMR will notify the undertaking in writing
with a deadline to make a remedy. For a late submission, the SAMR
will make a written decision to suspend the calculation of the
At the same time, the Exposure Drafts provide that for
enterprises that know or should know the occurrence of significant
new circumstances and new facts of the transaction or market, they
shall take the initiative to report to the SAMR. According to the
amendment, for enterprise which refuses to provide information or
provides false information, it shall be fined less than 1% of the
previous year’s sales or RMB 5 million, and the individual
shall be fined less than RMB 500,000.
- Issues yet to be clarified
The Exposure Drafts provide comprehensive stipulations on the
merger filing system, some rules are still need to be further
- Market value/valuation characterization
In the case of non-conventional active filing, the Exposure
Drafts stipulate that the market value/valuation of other
concentrating parties should be no less than RMB 800 million and
more than one-third of the turnover should be generated in China.
In terms of the characterization of market value / valuation, the
Exposure Drafts do not clarify.
Specifically, the market value of an enterprise is constantly
changing over time, and there are often significant differences in
market value at different time points. The time point to calculate
the market value has a great impact on whether the concentrating
transactions need to be filed. For valuation, different valuation
methods can be applied, including income approach, market approach,
cost approach, etc., and in certain circumstances, an enterprise
may need to apply more than two valuation methods at the same time.
It is yet to be further clarified what valuation methods can be
applied under different circumstances, whether the valuation
requires a valuation report issued by a third party, and whether
more than two valuation methods are required.
- How to deal with past unnotified transactions in accordance
On one hand, this amendment does not establish transition period
provisions. On the other hand, in practice, illegal concentration
is traceable over the long-term. In this case, there is uncertainty
about how to apply the new turnover criteria and the new legal
responsibilities, especially about how to deal with past unfiled
transactions in accordance with law. Issues that remain to be
further clarified include as follow.
- For the filing review, at what point is the transaction deemed
to be subject to the new turnover criteria? The time of signing the
concentration agreement or the time of closing of the
- For past unnotified transactions in accordance with law, is it
not considered illegal if the new turnover criteria are not
- Do legal liabilities for illegal concentration under the new
AML apply to illegal transactions before August 1, 2022? Does the
closing of a transaction serve as the time point for application of
the old and new laws?
- If the new fines of 5 million and less than 10% of turnover are
also applied to the past unnotified transactions in accordance with
law, will it violate the principle of non-retroactivity of the law?
Does the time point of the formal case registration of the
investigation of failure to notify in accordance with law acts as a
criterion for judgment?
The above issues have yet to be interpreted by the SAMR in the
subsequent formulation of supporting regulations, or to be explored
in law enforcement. When the above issues have not yet been
clarified by the supporting regulations and practice, for past
unnotified transactions, it is recommended that enterprises can
assessed them through the following steps:
Step 1: Assess whether restitution has been made for the past
unnotified transactions. For those that restitution has been made,
a different treatment can be considered from transactions that
restitution has not been made.
Step 2: Assess whether the transaction has met the new turnover
criteria. In this regard, it should be clarified that the new
criteria are still in the stage of exposure draft, so the
promulgation timing and content of the final criteria are subject
Step 3: Assess whether the transactions cause competitive
impairing consequence or effect. Based on whether the transaction
has competitive effect, there is a significant difference in the
penalties that may be imposed on the enterprise. For those that do
not have competitive effect, the enterprise may be fined less than
RMB 5 million, and for those that may have competitive effect, the
enterprise may be required to make reinstitution for the
transaction, in addition to a fine of up to 10% of turnover.
Considering that the new AML will come into effect on August 1,
2022, after the assessment listed above, the enterprise may
consider taking the initiative to conduct a remedial filing as
early as possible if needed, to reduce the legal risk to the
enterprise caused by the failure to notify in accordance with
1 Jet Deng and Ken Dai are Partners with Dentons’
China Antitrust team, respectively based in Beijing and Shanghai.
They can be reached via firstname.lastname@example.org
The authors would like to thank Dentons’ China Antitrust
team, particularly Edith Qu and Rangi He for their valuable
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.