Merger Remedy
Q1: MOFCOM Publishes Draft Rules on Merger Remedies to increase clarity and transparency on the merger remedy regime under the Anti-Monopoly Law (“AML“), China’s Ministry of Commerce (“MOFCOM“) published the draft Rules Regarding Imposition of Restrictive Conditions on Concentrations of Undertakings (the “Draft Rules“) on 27 March 2013 for public comments. What kind of contents does this draft mainly focus on?
A1: The Draft Rules are intended to cover not only divestiture, but also conduct remedies and will replace the Divestiture Rules once adopted.The Draft Rules consist of seven chapters and thirty eight provisions. It sets out a streamlined framework for the imposition of merger remedies, including the determination of remedies, implementation of remedies, supervision of remedies, change and cancellation of remedies, as well as the legal responsibilities for various parties.
Q2: Which parts of regulations are newly introduced?
A2: Types of Remedies, Notice of Competition Concerns, Divestiture Timeline, Upfront Buyer and Crown Jewel Provision, Review Clause and Legal Liabilities.
Q3: What kinds of remedies have been incorporated into the Draft Rules?
A3: The Draft Rules provide for three types of remedies: (i) structural remedies, (ii) behavioral remedies and (iii) a hybrid of both structural and behavioral remedies.
Q4: Which remedy is prefered by the Draft Rules?
A4: The Draft Rules are mainly focused on structural remedies. One of the likely reasons could be that behavioral remedies may take various forms and more unpredictable, such that a general provision will allow the parties involved more flexibility in coming up with different forms of remedy proposals.
Q5: What is the purpose for the Draft Rules to regulate the Notice of Competition Concerns?
A5: The Draft Rules provide that in order to facilitate the filing parties’ proposal of merger remedies. MOFCOM should explain its competition concerns and the reasons in a timely manner. It is the first time that MOFCOM introduces such a clause to “commit” to inform the parties its concerns timely.
Q6: Are there any burden of submission have to be borne by parties?
A6: The Draft Rules also set a deadline for the parties to submit the final remedy proposal no later than twenty days before the expiry date of the review period. It is not clear, though, whether the review period here refers to the normal review period of 120 days (Phase I and Phase II) or 180 days (Phase I, Phase II and extended Phase II).
Q7: How long is the time limit for divesting party to complete all closing formalities? Could it be extended, and how?
A7: The timeline on the divestiture processs is within 3 months from the date the sales agreement is executed. The Draft Rules, however, provide that the period can only be extended for 1 month at the most at the discretion of MOFCOM.
Q8: What are the Upfront Buyer provision and the Crown Jewel provision?
A8: The Draft Rules also introduce two new provisions – an up-front buyer provision (Article 18) and a crown jewel provision (Article 19). Pursuant to Article 18, under the following circumstances, MOFCOM is entitled to require the divesting party to locate a buyer and execute a sales agreement before the implementation of the concentration under review: (i) the competitiveness and salability of the business being divested is at great risk; (ii) the buyer’s identity has a decisive influence on whether the business being divested can regain competitiveness in the market; (iii) the divesting obligor cannot locate a qualified buyer within the set time frame; (iv) a third party claims rights in the business being divested; or (v) other scenarios identified by MOFCOM.In case a divesting party cannot locate a suitable buyer, Article 19 provides that the divesting party must agree to an alternative set of assets for sale.
Q9: How does the MOFCOM use its review mechanism?
A9: Under the review system, MOFCOM may amend or repeal the conditions, if it finds that the restrictive conditions can no longer lessen the negative impact on competition or otherwise when the original competition concerns have been released and there is no ground for maintaining the restrictive conditions.
|
