MOFCOM Rules Gun-jumping of two Domestic Joint Venture Deals


On 17 April 2018, the Ministry of Commerce (the “MOFCOM”) published two penalty decisions (the “Decisions”) issued by it to China Merchants International Container Terminal (Qingdao) Co, Ltd. (“CM Qingdao”) and its joint venture partners regarding their failure to notify MOFCOM of two joint venture deals.

One case is related to the establishment of a joint venture company between CM Qingdao and Qingdao Port (Group) Co., Ltd in 2010. On 5 June 2010, these two parties concluded a joint venture agreement to establish a joint venture, i.e. Qingdao Qianwan West Port United Terminal Co., Ltd. under joint control. On 9 June 2010, the joint venture obtained the business license.

The other case is also a joint venture project between CM Qingdao and Qingdao New Qianwan Container Terminal Co., Ltd. in 2009. On 18 December 2009, the joint venture agreement was signed and the joint venture under joint control, i.e. Qingdao Qianwan United Container Terminal Co., Ltd., obtained its business license.

According to the Decisions, the MOFCOM considers that the establishment of a joint venture under joint control falls into the scope of acquiring control of other undertaking or becoming able to exercise decisive influence over other undertaking by virtue of agreement or other means under Article 20 (3) of the PRC Anti-monopoly Law (the "AML"), and therefore constitutes a concentration in the meaning of the AML. Since the turnover threshold for notification is met in the above two cases, implementation of the joint venture projects without notification is considered as gun-jumping and breach of Article 21 of the AML.

After assessing the influence of the concentrations on the market competition, the MOFCOM concluded that the concentrations would not have the effect of eliminating or restricting the competition in the relevant market. Furthermore, taking into the consideration of the cooperation of the undertakings during the investigation, the MOFCOM only imposed a fine in the amount of RMB 200,000 on each undertaking in each of the above two cases.

So far in the year of 2018, the MOFCOM has published 6 penalty decisions on its official website, among which 5 cases are related to gun-jumping. Since the first gun-jumping penalty case of the MOFCOM in year 2014, there are in total 22 cases. In those cases, the MOFCOM considered that concentrations would not have the effect of eliminating or restricting the competition in the relevant market and only imposed fines. It remains to be seen whether the Chinese merger control review office after the merger of anti-trust enforcement agencies will take a more stricter approach on gun-jumping cases and whether the merger control regulations will be amended in the future to increase the fine on gun-jumping, which is currently up to RMB 500,000 and significantly low.