Chinese Merger Control Under the Antimonopoly Law

Chinese merger control under Chapter IV of the Antimonopoly Law (AML) requires mandatory premerger notification for transactions meeting specified turnover thresholds and establishes a multi-phase review process administered by the State Administration for Market Regulation (SAMR). Since the AML’s effectiveness in 2008, SAMR has reviewed thousands of transactions, prohibiting only a handful while imposing conditions on several dozen high-profile deals.

Turnover Thresholds

Notification is mandatory where the transaction satisfies any of the following thresholds established by the State Council: (1) the worldwide aggregate turnover of all parties in the preceding financial year exceeds RMB 10 billion, and the China domestic turnover of at least two parties each exceeds RMB 400 million; or (2) the China domestic aggregate turnover of all parties exceeds RMB 2 billion, and the China domestic turnover of at least two parties each exceeds RMB 400 million.

The 2022 AML revision confirmed a new threshold introduced by the State Council in 2018 for transactions involving undertakings with a combined market share above certain levels. The revision also introduced an optional voluntary notification mechanism and empowered SAMR to investigate transactions below the thresholds that have competitive concerns. Transactions that do not meet the thresholds but raise competition issues may be subject to SAMR investigation and review.

SAMR Review Procedures

SAMR merger review follows a three-phase structure. Phase I (simple cases) requires a decision within 30 calendar days from the date of acceptance of a complete filing. If SAMR determines that the transaction raises no competition concerns, it issues a clearance decision. If further investigation is needed, the case enters Phase II.

Phase II involves an in-depth investigation lasting up to 90 additional calendar days from the expiry of Phase I. SAMR may extend Phase II by up to 60 days in complex cases. The 2022 AML revision introduced a stop-the-clock mechanism allowing SAMR to suspend review periods while the parties respond to information requests or propose remedies. This mechanism replaced the previous practice of parties voluntarily withdrawing and refiling to reset the review clock.

During review, SAMR assesses the transaction’s effect on competition in the relevant market, considering market shares, concentration levels (HHI), barriers to entry, the transaction’s effects on technical development, and its impact on consumers and the national economy. SAMR may consult third parties, including competitors, customers, and industry associations, and may convene hearings.

Remedies and Conditional Approvals

Where a transaction raises competition concerns, SAMR may impose conditions or, in rare cases, prohibit the transaction. Conditions may be structural (divestiture of assets or businesses) or behavioral (firewall provisions, non-discrimination obligations, supply commitments). SAMR typically prefers structural remedies for horizontal overlaps and behavioral for vertical or conglomerate concerns.

Notable conditional approvals include the acquisition of Huiyuan by Coca-Cola (2009, prohibited), NXP’s acquisition of Freescale (2015, behavioral conditions), and Bayer’s acquisition of Monsanto (2018, structural and behavioral conditions). The first unconditional prohibition was in the Coca-Cola/Huiyuan case, where SAMR found that the transaction would eliminate competition in the juice market and reduce consumer choice. In 2021, SAMR prohibited the establishment of a joint venture between South Korea’s Hana Group and China’s Tonghe Group in the fine chemical market.

Gun-Jumping Penalties

Failure to notify a notifiable transaction (gun-jumping) or implementing a transaction before clearance subjects the parties to significant penalties. The 2022 AML revision increased the maximum fine for gun-jumping to 10% of the undertaking’s annual turnover in the preceding financial year. In addition, directors and managers personally responsible may face fines of up to RMB 1 million.

SAMR has actively enforced gun-jumping provisions. In 2020, SAMR imposed fines on a number of companies for implementing notifiable transactions without clearance, including fines on Alibaba’s acquisition of Intime Retail and Tencent’s acquisition of China Music Corporation. These cases signaled SAMR’s commitment to enforcing procedural compliance in merger control. The maximum possible penalty of 10% of annual turnover makes gun-jumping a potentially extremely costly violation for large enterprises.

The Procter & Gamble Case

The Procter & Gamble case (2012) was a landmark conditional approval involving the restructuring of P&G’s Chinese joint venture with Hutchison Whampoa. SAMR reviewed the transaction’s effect on the market for personal care products and imposed behavioral conditions requiring P&G to maintain certain post-transaction pricing and distribution practices. The case was significant because it involved a corporate restructuring rather than a straightforward acquisition and because SAMR imposed conditions that continued to regulate P&G’s conduct post-transaction. The case established that SAMR would review not only traditional M&A but also structural reorganizations that could affect competitive dynamics.