Towards a Simplified Review Procedure for Mergers in China

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Ninette Dodoo, Feb 11, 2014

In 2013, the Ministry of Commerce published the much-awaited Interim Regulations on Standards Applicable to Simple Cases of Concentrations between Business Operators for public comment. MOFCOM clearance has often trailed clearance in other major jurisdictions, including for cases that raise no significant competition concerns, or with little or no nexus, with China. The Draft Regulations are a welcome development, and are indicative of MOFCOM’s efforts to respond to criticism from the business community and observers about the length of its merger reviews. Some officials estimate that around 50 percent of notified transactions could be processed under the proposed procedure.

In terms of policy design, MOFCOM has opted for a set of rules that define ex ante categories of transactions (or simple cases) that ordinarily do not give rise to competition concerns and whose review will presumably be completed on an expedited basis. However, there are exceptions and the Draft Regulations identify cases where the simple case designation-and thus the benefit of a fast track procedure-would not apply or could be withdrawn. These exceptions raise questions around the predictability and certainty of the simple case procedure. The Draft Regulations also stop short of a commitment by MOFCOM to review simple cases on a timely basis and within Phase I, and offer no guidance on the procedures that MOFCOM will adopt in such cases. That said, the introduction of this procedure is welcome.

In this article, we consider certain aspects of China’s merger review process that underscore the need for a simplified procedure for non-problematic deals (Section II), the ex ante criteria adopted by MOFCOM to identify simple cases and the circumstances in which the simple case designation would not apply or could be withdrawn (Section III), and some of the procedures that may need to be introduced in order to maximize the benefits of the proposed simple case procedure (Section IV).