# Presentation: 199305

## China’s Anti-Monopoly Law:

***Perspectives on Merger Review***
**Mark Whitener**
**Senior Counsel, Competition Law & Policy**
**General Electric Company**
**U.S.-China Legal Exchange**
**Washington, DC**
**December 8, 2006**

## Overview

- It is an honor to meet with such a distinguished delegation to discuss China’s proposed Anti-Monopoly Law
- China’s interest in obtaining international input on the AML is very much appreciated
- My comments reflect my experience advising a company that does business globally, my work with the ABA, and my prior experience at the FTC
- Consistency between the AML and internationally recognized competition law principles has benefits for China and for firms doing business in China
- The proposed AML reflects consistency with international norms in numerous respects.  Some areas remain where more consistency could be achieved

## The AML and International Competition Law Principles

- AML’s goals:  protecting market competition, efficiency, rights of consumers (but also rights of “undertakings”)
- Prohibition of cartels and other horizontal monopoly agreements, with exemptions for legitimate/efficient arrangements  (but also exemptions to promote certain non-competition-based interests)
- Abuse of dominance provisions reflect important international principles, but some concerns remain:
- Defining dominance – market share presumptions, joint dominance
- Defining abuse – some legitimate practices may be questioned
- Competition-based standards for merger review
- Merger filing thresholds – lack of local nexus
- Minimum fine requirement

## Merger Review

- August 2006 Rules on the Mergers and Acquisitions of Domestic Enterprises by Foreign Investors – several investigations of proposed acquisitions
- Standards for review under M&A Rules are not entirely clear
- AML’s merger review provisions are based mainly on internationally recognized competition standards
- Confirmation that AML and its competition-based standards will replace prior M&A rules would be helpful

## Merger Filing Thresholds

- The most immediate and direct impact of the AML’s merger control provisions is  which deals must be notified
- Thresholds in proposed AML (Art. 17) require filing if:
- Aggregate worldwide turnover of *all* parties to the transaction exceeds RMB 12 billion, and *one* party’s turnover in China exceeds RMB 800 million
- No local nexus requirement – one party’s global/Chinese presence could trigger filing requirement, even if transaction and other party have no connection to China
- Likely to result in many filings for transactions that have no impact in China

## Merger Filing Thresholds

- International consensus on merger notification best practices is reflected in many national filing systems, and in the International Competition Network’s Recommended Practices, _[http://www.internationalcompetitionnetwork.org/media/archive0611/mnprecpractices.pdf](http://www.internationalcompetitionnetwork.org/media/archive0611/mnprecpractices.pdf)_
- A key ICN recommendation is that filing requirements should be limited to transactions/parties that have an appropriate “local nexus” to the jurisdiction, such as a material level of sales or assets by at least two parties to the transaction
- Many filing systems follow these practices, including the US, EU, Canada, France, Belgium, Netherlands, Switzerland, Sweden, Finland, Japan, Mexico, others
- Global trend is toward increasing adoption of filing thresholds consistent with ICN recommendations (e.g., France)

## Merger Filing Thresholds

- Including a local nexus requirement in the AML would be consistent with this increasing global consensus
- Local nexus requirement eliminates unnecessary filings for transactions that have no impact on China, reducing the burden on China’s merger review authorities and on the parties to proposed mergers
- Simple to implement (e.g., require a material level of Chinese sales/assets by *two *parties to the transaction, or by the acquired business)
- China could always retain the authority to review transactions that do not require notifications
- If AML remains unchanged, enforcement authorities might consider implementing filing rules to exempt transactions that lack meaningful connection to China

## Closing Thoughts

- China’s interest in obtaining views on the AML from the international business and legal communities is very much appreciated
- Thank you for your consideration of these comments