The High-Wire Balancing Act of Merger Control under China’s Anti-Monopoly Law

Abstract

Since August 2008, when China’s Anti-Monopoly Law became effective, its Ministry of Commerce has reviewed over 450 notified transactions and issued over a dozen decisions. These decisions, plus the unconditional clearance of several transactions, reveal MOFCOM’s rapidly growing sophistication in analyzing the competition implications of transactions and overall mainstream approach to merger analysis, as well as its continued delicate balancing of competition factors with other considerations. The decisions may also reflect the natural conservatism when acting in what is for China still fairly uncharted territory. They may indicate one approach for a developing competition law regime to establish a body of precedents within the global mainstream while accommodating specific domestic circumstances. A close review of MOFCOM’s decisions leads to a conclusion that there remains a risk that the AML merger control process will be politicized and trumped by industrial policy and nationalism. It seems also clear that any accommodation of industrial policy or nationalism is made with a care to minimize distortion of the development of competition law in China. MOFCOM is deftly developing a public record that will support development of AML enforcement generally within mainstream competition law internationally, while addressing in ways primarily off-the-record non-competition domestic concerns. The decisions may reflect the fact that the AML expressly requires consideration of non-competition factors such as China’s national economic development. Those published decisions that differed significantly from that of other major competition law jurisdictions are noteworthy in generally imposing conditions where other authorities imposed none or fewer, in the nature of the conditions imposed, and in the possible motivations for the outcomes. This paper considers MOFCOM’s AML enforcement record. It summarizes the merger control regime created under the AML and its implementing regulations. It analyzes the statistics through mid-December 2011 and the published decisions through August 17, 2012. Some themes that may be discerned are discussed. First, MOFCOM has achieved flexibility in its implementation of the AML beyond that provided in the statute, especially in the time line for merger review. Second, MOFCOM’s inaction in some instances and apparent off-the-record positions in other situations can be explained as ways to accommodate nationalism and industrial policy without creating a record of competition law enforcement skewed by non-competition factors. The paper next reviews the published decisions where nationalism and industrial policy concerns may have been accommodated. The conditions imposed by MOFCOM in several cases appear explicable primarily if industrial policy was considered. Nonetheless, a complete review of the published decisions indicates that MOFCOM’s analyses reflect more a skepticism toward analyses of parties’ likely conduct post-transaction, as well as a recognition that its only opportunity to address concerns is at the merger control stage, because post-transaction abuse of market power would be within the purview of the State Administration for Industry & Commerce and the National Development & Reform Commission. Where the transaction appears unlikely to affect a significant Chinese industry, MOFCOM appears confident in its merger analyses. The paper closes with recognition of the overall challenge for MOFCOM’s development of AML merger control.