First anti-trust provisions regulating mergers in China

China
The recently released provisional rules on foreign mergers and acquisitions contain, for the first time, anti-trust provisions to regulate foreign mergers and acquisitions transactions in excess of a certain scale.

This is seen as an attempt by the government to curb over concentration of economic strength in certain sector leading to unfair competition, in particular those which result from overseas acquisitions of domestic companies.

The provisional rules provide for a regulatory regime which requires approval from the foreign trade ministry for any M&A transactions involving a foreign party if:

  • any one of the parties owns assets which are worth more than RMB300 million in China;
  • the foreign party (and its associates) controls more than 25% of the domestic market;
  • the transaction will result in the foreign party controlling more than one-third of the domestic market or more than 15 foreign-invested-enterprises in the same industry in China;
  • the annual sales volume in China of any one party to the transaction exceeds RMB500million.

The government has yet to announce the date on which these rules will come into effect.

If you have any questions regarding the above, please contact Luke Filei in Shanghai at luke.filei@cms-cmck.com.