Merger Controls First Edition - J Sagar Associates

King & Wood PRC Lawyers China
The publication of these Investigation and Penalty Draft Rules shows MOFCOM’s commitment to stepping up enforcement
in relation to a failure to notify notifiable concentrations. The draft rules provide some clarity as to what happens if a
business operator is being investigated for a failure to notify MOFCOM of a notifiable concentration. However, the
following three issues are not clear in the draft:
(i) The Investigation and Penalty Draft Rules provide that business operators could be found in breach of the
notification obligation if they have “implemented” a notifiable concentration. But the term “implement” has not
been defined. If this term is construed broadly, certain preparatory work (i.e. preparation for a concentration) might
be construed as implementing a concentration. On the other hand a narrow interpretation of this term would point
to “closing” a concentration.
(ii) In relation to a situation where a notifiable concentration is subject to a further investigation, pursuant to the
Investigation and Penalty Draft Rules, it is not clear whether there would be a maximum statutory period in which
MOFCOM would complete its review process.
(iii) The Investigation and Penalty Draft Rules contain a provision which sets out the remedies which a business operator
may face for a failure to notify MOFCOM of a notifiable concentration. This provision states “MOFCOM shall
order business operators to: cease implementing the concentration; dispose shares or assets within a stipulated
period; transfer the (relevant) business within a stipulated period; or reinstate the market situation before the
concentration. MOFCOM may also impose a fine of not more than RMB500,000”. This provision is similar with
Article 48 of the AML, except for the term “shall” which has been omitted from Article 48 of the AML. It is unclear
as to the significance of the addition of this term “shall”. One view is that the addition of the term “shall” shows a
stronger compulsion by MOFCOM to impose the above-mentioned remedies.
* * *
Endnotes
1 MOFCOM Announcement [2010] No. 53.
2 MOFCOM Announcement [2009] No. 77.
3 See MOFCOM Announcement [2009] No. 77, and MOFCOM Announcement [2010] No. 53. In MOFCOM
Announcement [2009] No. 77, MOFCOM cited the ATC-3 categories and the names of the two relevant product
markets: J1C (Broad Spectrum Penicillins), and N6A (Antidepressants & Mood Stabilisers). In MOFCOM
Announcement [2009] No. 77, MOFCOM only mentioned the names of the two relevant product markets:
ophthalmic anti-inflammatory and anti-infective combination products; and Lens care products. The relevant ATC-
3 categories of the two product markets are: S1C; and S1K.
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