CN04 - China clamps down on merger control
01 February 2022
On 5 January 2022, China's State Administration for Market Regulation ("SAMR") imposed a total of RMB 10.5 million (c. USD 1.65 million) in penalties for "gun-jumping" against a range of high-profile companies in relation to 13 separate transactions.
Key takeaways
- Continuing its active merger control enforcement trend, the SAMR has imposed a string of maximum penalties against high profile companies that have failed to comply with notification and clearance obligations under the Anti-Monopoly Law ("AML").
- While current penalties for gun-jumping are capped at RMB 500,000, proposed reforms to the AML appear set to increase these caps to potentially up to 10% of turnover.
- The SAMR's enforcement actions are part of a noticeable trend of enforcement by competition authorities in the APAC region to penalise entities for gun-jumping conduct. Businesses need to ensure that they stay on top of merger clearance requirements in relevant jurisdictions in which they are active in order to avoid unnecessary penalties and enforcement action.
This isn't the first time that the SAMR has announced multiple penalty decisions in a short period of time. For instance, between 13 and 17 November 2021, the SAMR imposed fines of RMB 27.5 million (c. USD 4.3 million) for gun-jumping conduct in relation to 43 transactions.
The following details should be noted in relation to the 13 transactions:
Competition authorities across the APAC region are increasing enforcement action against entities that have proceeded to complete notifiable transactions prior to receiving required clearance. The SAMR is no exception. In particular, it appears to be continuing its enforcement "rampage" against companies in the e-platforms and digital media sectors. It also continues to take a very broad approach to the concept of "control" – such that non-strategic investors and minority investors such as private equity firms could also be culpable of gun-jumping conduct.
While maximum fines for gun-jumping are capped at RMB 500,000 (c. USD 79,000), there is a proposal to increase gun-jumping fines to up to 10% of turnover for each undertaking involved. Penalties involving transactions which do not restrict or eliminate competition in Chinese markets will be capped at RMB 5 million (c. USD 790,000).
The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
Readers should take legal advice before applying it to specific issues or transactions.