A Five Year Review of Merger Enforcement in China
Dr. Fei Deng and co-author Cunzhen Huang of Cleary Gottlieb performed an in-depth analysis of merger cases MOFCOM has reviewed to date. In this article for The Antitrust Source, they summarized characteristics of the decisions that MOFCOM has published in cases where the transaction was blocked or approved with conditions. This article is a comprehensive study of MOFCOM’s merger review activities during its first five years of enforcement.
The authors conclude that, at a high level, merger enforcement in China follows similar procedures and uses a similar set of methodologies as in the European Union and in the United States. However, there are significant differences in the details in practice. Overall, MOFCOM’s merger enforcement appears to be more restrictive in terms of its giving less weight to efficiencies, its receptiveness to non-horizontal theories of competitive harm, and its application of behavioral remedies, especially long-term hold-separate remedies. Hold-separate remedies are especially detrimental to the merging parties as well as to customers and competition generally because the merging parties are unable to realize the efficiencies resulting from the merger. Although in theory the parties could appeal in an administrative tribunal to defend the transaction in China if they do not agree with MOFCOM’s decision, to date no one has appealed.
Some of the early fears about how the AML would be enforced, such as predictions that industrial policy considerations could overshadow antitrust considerations, appear to remain a concern, at least in some contexts, while other early fears, such as the prospect of reportable deals involving SOEs or Chinese firms more generally not being notified or reviewed, have not come to pass. However, MOFCOM has clearly ramped up along the learning curve at an impressive speed over its first five years. Shorter review duration, more sophistication in analysis, and more transparency can be expected with the enactment of simplified procedural rules, an increased adoption of economic analysis in actual cases, and more experience.