Problems relating to Trade and Investment on China

20. Monopoly
Issue	Issue details	Requests	Reference

(1) Complex and Delayed Examination on Concentration of Undertakings

- Procedures are complex and time consuming for acceptance and examination of undertaking concentration, (taking a few months for drafting the plan), retarding the enterprises' desire to expedite investment.
- The scope of application is too broad on state examination for business operators concentration (that relies only upon sales for drawing its conclusions), which is time consuming (taking more than 6-months at times). It delays by large margin the merger project in some cases.

- It is requested that MOC and other authorities in concern:
-- establish the structure that enables expedited examination system, and
-- identify clearly the basis of the examination that stretches into the 3rd stage.
- In a merger case, which is prima facie unrelated to monopoly in the related market or to national security, it is requested that GOC:
--simplifies it examination, or
--replaces pre-merger examination with post-merger examination.

- Anti-Monopoly Law
- Measure for the Undertaking Concentration Examination
- Notice of the General Office of the State Council on the Establishment of the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors
- Provisions of MOC on the Implementation of the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors
- Provisions of the State Council on the Standard for Declaration of Concentration of Business Operators
- Provisions of the MOC on the Implementation of the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors

(2) Requirement for Total World Sales for Notification of Company Mergers

- Notification to MOC is necessary for combination of enterprises with global sales over 10-billion yen in total of the group enterprises, including the parent and the fellow subsidiaries, even in the case where no sales at all results in the PRC market from the combination.

- It is requested that GOC replaces the requirement for the global sales with only the domestic sales in PRC.

- Anti-Monopoly Law, Article 21

(3) Excessive Scope of NEM

- Compared to other countries on combination of business operators, the scope of NEM is extremely wide, compared to antimonopoly laws of other countries. It is a factor that hinders worldwide business activity irrespective of the internal/external markets of PRC.

- It is requested that MOC:
-- narrows the scope of information requiring submission, and
-- further clarifies the NEM requirements.

(4) Excessively Complex & Delayed NEM Examination Procedures

- Despite the introduction of simplified examination procedures, PRC examination on concentration of business operators blocks speedy M&A consummation, and impedes the subsequent scheduling, because:
(1)It stretches over a long period (for more than 2-months, even for a simplified examination),
(2)It requires production of vast amount of documents, and
(3)It requires advance notification of even external cases unrelated to the PRC domestic market.
- Administrative procedures on merger filing are quite complex and time consuming.

- It is requested that GOC:
-- beefs up the examination system (staff increase, etc.),
-- streamlines submission materials,
-- formulates exemption or limits the items, subject to notification requirements,
-- improves the filing work protocol, after the practices, exemplified by antimonopoly authorities in EU, the U.S., Japan, etc.
- It is requested that GOC:
-- simplifies the so-called "Merger Filing" examination, and
-- cuts down the requisite time.

- Anti-Monopoly Law
- Provisions of the State Council on the Standard for Declaration of Concentration of Business Operators (08-03-2008)
- Measure for the Undertaking Concentration Declaration: Order of MOC (No. 11 [2009])

(5) Nebulous Schedule for Business Operator's Merger Examination

- While operation has started on implementation of "interim provisions on standards applicable to simple cases of concentration of undertakings (interim provisions)", and the cases based on the interim provisions are beginning to get published, however, it is done with some caveat: (1) the time required for the decision is undefined on whether the case is "interim", (2) a possibility remains that a case initiated under "interim provisions" could be later changed to a normal case, wasting the time spent on examination on interim basis, ending up in just adding extra time over the normal examination, compelling the business operator to think twice before taking advantage of the interim provisions. In addition, due to the rush of applicants right after the operational start, and due probably to the shortage of workforce at the authority's window, there is some reservation, if the expected speedier examination could in fact be practically accomplished
- In addition, requisite details of notification are not defined, GOC's acceptance of notification requires a long waiting time, and the timing of the GOC's approval remains undefined.

- It is requested that GOC redoubles it effort in:
-- further clarifying the new process, and
-- further reducing the time required for completing the examination.
- It is requested that GOC clearly identifies the substantive matters it requires in accepting notification.

- Anti-Monopoly Law, Article 21

(6) Inequality in Filing Operators Merger Notification

- Inequality in business operation has surfaced, as some business operators run their business without observing the requirements for Business Operator's Merger Notification (BOMN).

- It is requested that GOC:
-- ensures thoroughness in penalizing those not observing the BOMN requirement, and
-- thoroughly publishes the cases of penalties upon non-conforming parties.

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