Understanding a picture, the State Administration for Market Regulation has issued the "Guidelines for Anti Monopoly Compliance in Concentration of Business Operators" | Guidelines for Anti Monopoly Compliance in Concentration of Business Operators

On September 11th, the State Administration for Market Regulation officially released the Anti Monopoly Compliance Guidelines for Business Concentration. This is the first compliance guidance document issued by the anti-monopoly law enforcement agency of the State Council in the field of business concentration supervision since the implementation of the Anti Monopoly Law in 2008, which is of great significance for improving the level of normalized supervision of business concentration.

The Guidelines focus on the regulatory characteristics of concentration of operators and the compliance needs of enterprises, providing useful references for enterprises in terms of compliance risk, compliance management, and compliance protection. Enterprises can establish and improve internal compliance management systems and enhance their compliance management capabilities based on their own situation, such as business scale, management mode, concentration frequency, and compliance system.

As an important measure to promote normalized supervision, the "Guidelines" reflect the following characteristics: firstly, emphasizing the purpose of service. The "Guidelines" propose that market regulatory departments should regularly understand the compliance situation of enterprises and provide necessary support, while actively carrying out publicity and training. The second is to emphasize effectiveness as the basis, and the "Guidelines" focus on achieving compliance effects, without requiring enterprises to establish a separate centralized compliance system for operators to avoid additional compliance costs. The third is to highlight the enterprise as the center, and the "Guidelines" fully consider the differences in management models of different types of enterprises and the frequency of investment and mergers and acquisitions, providing enterprises with sufficient flexibility in compliance construction. The fourth is to emphasize problem orientation, and the "Guidelines" for the first time introduce case studies to help enterprises better understand the compliance risks that may be faced in various stages of investment and mergers and acquisitions.

Next, the State Administration for Market Regulation will actively carry out compliance promotion and training with various forces such as provincial market supervision departments, business associations, law firms, etc., timely select and promote typical compliance cases, and create a good atmosphere of competition and compliance in the whole society. At the same time, establish and improve a compliance evaluation system for concentration of operators, a risk warning and warning mechanism, and a normalized communication mechanism to better serve the standardized and healthy development of enterprises.

Notice of the State Administration for Market Regulation on Issuing the Anti Monopoly Compliance Guidelines for Business Concentration

To the market supervision bureaus of various provinces, autonomous regions, municipalities directly under the central government, and Xinjiang Production and Construction Corps:

We are now issuing the Anti Monopoly Compliance Guidelines for Business Concentration to you. Please take into account the compliance situation of business operators in your jurisdiction and carry out relevant compliance publicity and training work.

the State Administration for Market Regulation

September 5, 2023

Guidelines for Anti Monopoly Compliance in Business Concentration

general provisions

Article 1 Purpose and Basis

In order to guide operators to implement the main responsibility of anti monopoly compliance in concentration of operators, improve their awareness and management level of anti monopoly compliance in concentration of operators, and promote the healthy development of socialist market economy, this guideline is formulated in accordance with the Anti Monopoly Law of the People's Republic of China, the Regulations of the State Council on the Declaration Standards for Concentration of Operators, and the Regulations on Concentration of Operators Review.

This guideline is a special guideline issued by the Anti Monopoly Commission of the State Council for the Anti Monopoly Compliance Guidelines of Business Operators in the field of business concentration. Operators can establish an anti-monopoly compliance management system for concentration of operators based on their own situation, such as business scale, management mode, concentration frequency, compliance system, etc., in accordance with this guideline, or incorporate the relevant compliance elements of concentration of operators into their existing anti-monopoly compliance management system.

Article 2 Necessity of Compliance

Concentration review is a pre monopoly regulatory system aimed at preventing operators from excluding or restricting relevant market competition through concentration.

Strengthening the anti monopoly compliance management of concentration of operators can help operators identify, evaluate, and control the legal risks of concentration of operators, avoid concentration of operators that may have the effect of excluding or restricting competition, and prevent them from bearing legal responsibilities due to illegal implementation of concentration.

Article 3 Scope of Application

This guideline applies to the antitrust compliance activities of operators in China and abroad when implementing concentration of operators.

Chapter 2 Main Provisions on the Examination of Concentration of Business Operators

Article 4 Concentration of Business Operators

Concentration of operators refers to the following situations: merger of operators, acquisition of control over other operators by acquiring equity or assets, acquisition of control over other operators by operators through contracts or other means, or the ability to exert decisive influence over other operators.

For a newly established joint venture, if at least two operators jointly control the joint venture, it constitutes a concentration of operators; If only one operator independently controls the joint venture and the other operators do not have control, it does not constitute a concentration of operators.

Article 5 Declaration of Concentration of Business Operators

If the concentration of operators meets the declaration standards, operators shall apply to the State Administration for Market Regulation in advance. Concentration shall not be carried out without application or approval after application. If the declaration standards are not met, but there is evidence to prove that the concentration of operators has or may have the effect of excluding or restricting competition, the State Administration for Market Regulation may require operators to declare and notify them in writing, and operators shall declare in accordance with the law.

If there are any of the following situations in the concentration of business operators, they may not declare to the State Administration for Market Regulation:

If one operator participating in the concentration owns more than 50% of the voting shares or assets of each other operator;

More than 50% of the voting shares or assets of each operator participating in the concentration are owned by the same operator who did not participate in the concentration.

Article 6 Declaration Obligators

The concentration of business operators implemented through merger, where all parties involved in the merger are obligated to declare; In other cases of concentration of operators, the operators who have obtained control or are able to exert decisive influence shall be the declaration obligors, and other operators shall cooperate.

If there are multiple declaration obligors for the same business concentration, one declaration obligor can be entrusted to declare. If the entrusted declaration obligor fails to declare, other declaration obligors cannot be exempted from the declaration obligation. If the declaration obligor fails to declare, other operators participating in the concentration may submit a declaration.

If the declaration obligor fails to fulfill the declaration obligation in accordance with the law, resulting in illegal implementation of concentration, the declaration obligor shall bear corresponding legal responsibilities.

Article 7: Examination of Concentration of Business Operators

After receiving the declaration for concentration of business operators, the State Administration for Market Regulation shall evaluate the potential competitive impact of concentration of business operators in accordance with the law. After examination, the State Administration for Market Regulation has unconditionally approved the concentration of business operators that do not have the effect of excluding or restricting competition in accordance with the law, and approved or prohibited the concentration of business operators that have or may have the effect of excluding or restricting competition in accordance with the law.

Article 8 Illegal implementation of concentration investigation

If the concentration of operators meets the declaration standards, but the operators fail to declare the implementation of concentration, implement concentration without approval after declaration, or violate the review decision, the State Administration for Market Regulation shall conduct an investigation in accordance with the law.

If the concentration of operators does not meet the declaration standards, but there is evidence to prove that the concentration of operators has or may have the effect of excluding or restricting competition, and the operators fail to declare in accordance with relevant regulations, the State Administration for Market Regulation shall conduct an investigation in accordance with the law.

The main factors for determining whether to implement concentration include whether to complete the registration of the operating entity or change of rights, appoint senior management personnel, participate in actual business decision-making and management, exchange sensitive information with other operators, and substantially integrate business.

Article 9 Legal Risks and Responsibilities

Operators who violate the provisions of the Anti Monopoly Law on concentration of operators may face the following legal risks or bear the following legal responsibilities:

For those who illegally implement concentration and have or may have the effect of excluding or restricting competition, the State Administration for Market Regulation shall order them to stop implementing concentration, dispose of shares or assets within a specified period, transfer business within a specified period, and take other necessary measures to restore to the state before concentration, and impose a fine of no more than 10% of the sales revenue of the previous year; Those who do not have the effect of excluding or restricting competition shall be fined no more than 5 million yuan;

If a business operator refuses to provide relevant materials or information, or provides false materials or information, or conceals, destroys, or transfers evidence, or engages in other refusal or obstruction of the investigation conducted by the State Administration for Market Regulation in accordance with the law, the State Administration for Market Regulation shall order it to make corrections and impose a fine of no more than 1% of the previous year's sales revenue on the unit. If there is no sales revenue in the previous year or the sales revenue is difficult to calculate, a fine of no more than 5 million yuan shall be imposed; Impose a fine of up to 500000 yuan on individuals;

If the circumstances of the illegal act are particularly serious, the impact is particularly severe, and the consequences are particularly serious, the State Administration for Market Regulation may determine the specific amount of the fine in the second item, which is between twice and five times the amount of the fine;

Those who are subject to administrative penalties for illegal acts shall be recorded in their credit records in accordance with relevant national regulations and publicly disclosed to the public;

Those who engage in monopolistic behavior and cause losses to others shall bear civil liability in accordance with the law, and those who harm public interests may face civil public interest litigation;

If an illegal act constitutes a crime, criminal responsibility shall be pursued in accordance with the law.

Chapter 3 Key Compliance Risks

Article 10: Concentration of Key Business Operators

It is recommended that operators focus on the following concentration of operators and fully evaluate the risks of anti-monopoly laws:

Merge with operators in China with a turnover exceeding 400 million yuan in the previous fiscal year;

Acquiring equity or assets of operators in China with a turnover exceeding 400 million yuan in the previous accounting year;

Jointly acquiring equity or assets of other operators with a domestic revenue exceeding 400 million yuan in the previous accounting year in China;

Obtaining control over or being able to exert decisive influence over an operator with a domestic revenue exceeding 400 million yuan in the previous accounting year through contracts or other means;

Establishing a new joint venture with operators in China with a turnover exceeding 400 million yuan in the previous fiscal year;

Concentration of operators with significant transaction amounts or potential significant impact on the market, which has received widespread attention in the industry.

The standard of 400 million yuan in revenue referred to in the preceding paragraph and Article 20, Paragraph 1 of these guidelines is established based on the declaration standards at the time of publication of these guidelines. If the declaration standards are modified in the future, the standard of 400 million yuan will be adjusted accordingly.

Article 11 Key points of attention when determining whether declaration should be made

When determining whether a transaction should be declared as a concentration of operators, the first step is to determine whether the transaction constitutes a concentration of operators, and secondly, to determine whether the concentration of operators meets the declaration standards. It is recommended to refer to the provisions of the "Regulations on the Examination of Concentration of Operators" regarding the determination of control rights and the calculation of turnover. When determining whether a declaration should be made, it is important to focus on the following risks:

Inaccurate determination of control rights and misjudgment of transactions do not constitute concentration of operators, resulting in failure to declare illegal implementation of concentration in accordance with the law.

The determination of whether a transaction constitutes a concentration of operators depends on whether the operator has obtained control over other operators through the transaction or is able to exert decisive influence on them. Acquiring minority equity may also result in obtaining control, thus constituting a concentration of operators. A company acquires 20% equity of B company. Although A company is not the largest shareholder, A company can independently veto B company's annual business plan, financial budget, appointment and removal of senior management personnel and other management matters. Therefore, A company is likely to gain control over B company, forming a concentration of operators. If the concentration of operators meets the declaration standards and Company A fails to declare, it constitutes failure to declare and illegally implement concentration in accordance with the law.

Inaccurate calculation of turnover, misjudgment of concentration of operators not meeting declaration standards, resulting in failure to declare and illegally implement concentration in accordance with the law.

The turnover of the operators participating in the concentration includes the total turnover of the operator and all operators who have direct or indirect control relationship with the operator at the time of declaration, but does not include the turnover between the above-mentioned operators. As the acquirer, Company A's domestic revenue in China was only 200 million yuan in the previous accounting year. However, if the domestic revenue of Group B, to which Company A belongs, met the declaration standards in the previous accounting year, the calculation should be based on Group B's revenue when determining whether it met the declaration standards. If Company A, based on a turnover of 200 million yuan, believes that it has not met the declaration standards and has not declared, it may constitute failure to declare in accordance with the law and illegal implementation of concentration.

Article 12 Key Points of Attention in Judging When to Declare

For concentration of operators that meet the declaration standards, after signing the concentration agreement, operators should declare to the State Administration for Market Regulation before implementing concentration. Failure to declare in a timely manner may constitute failure to declare and illegally implement concentration in accordance with the law.

A step-by-step acquisition transaction between operators for the same economic purpose may constitute a concentration of operators if the transactions are interrelated and mutually conditional, and need to be declared before implementing the first step. A company and B company sign a transaction agreement, according to which A company will acquire all the equity of the target company held by B company in three steps. The first step is to acquire 16% equity, the second step is to acquire 34% equity, and the third step is to acquire the remaining equity. Finally, all 100% equity acquisitions will be completed. This multi-step transaction is likely to constitute a concentration of operators. If it meets the declaration standards, it needs to be declared before the implementation of the first step, otherwise it will constitute failure to declare and illegally implement concentration in accordance with the law.

Article 13: "Rush" after declaration

After applying for concentration of operators, before obtaining approval from the State Administration for Market Regulation, operators are not allowed to implement concentration, otherwise it will constitute a "race" and bear legal responsibility for illegal implementation of concentration.

[Case] Company A and Company B planned to establish a new joint venture and filed for concentration of business operators in accordance with the law. However, before the State Administration for Market Regulation made a decision on concentration of business operators, the registration procedures for the joint venture were completed, which constitutes illegal implementation of concentration. A company and B company bear legal responsibility for illegal implementation of concentration.

Article 14 Requirements for Declaration Agents

The applicant can declare on their own or entrust others to declare on their behalf in accordance with the law. The applicant shall choose agents strictly and prudently, strengthen the management of agency behavior, and bear corresponding responsibilities in accordance with the law. The declaration agent shall operate honestly and in compliance with regulations, and shall not intentionally conceal relevant information, provide false materials, or take other actions to obstruct the review and investigation of business concentration cases.

Article 15 Requirements for application materials

The applicant shall be responsible for the authenticity, accuracy, and completeness of the application documents and materials. The declaration agent is responsible for assisting the applicant in reviewing the authenticity, accuracy, and completeness of the declaration documents and materials.

Article 16 Exclusion and Restriction of Competitive Risks

If the State Administration for Market Regulation deems that a concentration of business operators declared in accordance with the law has or may have the effect of excluding or restricting competition, it will be approved or prohibited with additional restrictive conditions.

Evaluating the competitive impact of concentration of operators can examine the ability, motivation, and possibility of relevant operators to individually or collectively exclude or restrict competition. If the concentration involves upstream and downstream markets or related markets, the ability, motivation, and possibility of relevant operators to use their control in one or more markets to exclude or restrict competition in other markets can be examined.

[Case] Operators can refer to the announcement of the anti-monopoly review decision on the conditional approval/prohibition of concentration cases published on the website of the State Administration for Market Regulation.

Article 17 Violation of Review Decision

If the concentration of operators is approved with additional restrictive conditions, operators shall strictly abide by the restrictive conditions. If concentration of operators is prohibited, operators shall not implement concentration.

[Case] A Company's acquisition of B Company's equity concentration has been approved with additional restrictive conditions. One of the conditions is to require Company A not to reduce the discounts given to distributors for related products, and to entrust a supervisory trustee to supervise the implementation. The supervisory trustee found that the discount given by Company A to distributors violated the relevant requirements of the conditional review decision. After investigation and verification, the State Administration for Market Regulation imposed administrative penalties on Company A in accordance with the law.

Article 18: Obstacles to the Examination and Investigation of Concentration of Business Operators

Cooperating with the examination and investigation of concentration of operators is a legal obligation that operators should abide by. If the operator refuses to provide relevant material information, or provides false material information, or conceals, destroys, or transfers evidence, or engages in other refusal or obstruction of investigation, they will bear more serious legal consequences.

Article 19: Anti monopoly Risks of Concentration of Overseas Business Operators

There are differences in the standards and procedures for declaring concentration of business operators in different jurisdictions. When conducting business on concentration of operators, it is recommended to also pay attention to the anti monopoly regulatory laws and regulations on concentration of operators or merger control in overseas jurisdictions that may be involved.

Regarding the anti monopoly compliance of overseas business concentration, business operators can refer to the compliance content of the State Administration for Market Regulation's "Guidelines for Overseas Anti Monopoly Compliance of Enterprises" on business concentration.

Chapter 4 Compliance Risk Management

Article 20 Compliance Management System

Encourage operators with a concentration demand to establish a concentration of operators anti monopoly compliance management system, especially for operators with an annual turnover exceeding 400 million yuan in China; It is recommended that operators with an annual turnover exceeding 10 billion yuan in China establish a centralized anti-monopoly compliance management system.

Encourage eligible group enterprises to establish anti monopoly compliance management systems for concentration of operators at all levels of the parent and subsidiary companies, or take effective measures to cover the anti monopoly compliance management of concentration of operators in member enterprises at all levels of the group.

Article 21 Compliance Management Responsibilities

Operators may establish or designate relevant departments to undertake the responsibilities of anti monopoly compliance management for concentration of operators, mainly fulfilling the following responsibilities:

Develop, evaluate, and update anti monopoly compliance management systems and measures for concentration of operators, and supervise the implementation of these systems and measures;

Identify and evaluate the anti monopoly compliance risks of concentration of operators, and promptly stop and correct non compliant concentration behaviors of operators;

Report the anti monopoly compliance situation of business concentration to the decision-making or senior management, promptly alert major compliance risks, and take corresponding measures;

Provide anti monopoly compliance advice, consultation, and guidance for relevant internal departments and personnel on business concentration;

Organize anti monopoly compliance training for concentration of business operators to enhance the compliance awareness and ability of relevant personnel;

Cooperate with personnel and other relevant responsible departments to implement relevant compliance reward and punishment measures;

Research and follow up on the latest laws and regulations as well as law enforcement practices on concentration of business operators at home and abroad;

Guide the construction of anti monopoly compliance management system for the concentration of business operators within the group;

Coordinate and organize relevant departments and personnel within the organization to cooperate with the State Administration for Market Regulation's review and investigation of business concentration;

Other compliance related work.

The compliance management department may entrust professional institutions to assist in carrying out relevant work.

Article 22: The person in charge of antitrust compliance in the concentration of business operators

Encourage operators who have reached a certain scale and engage in frequent concentration behaviors to set up anti monopoly compliance officers for concentration of operators, responsible for anti monopoly compliance matters related to concentration of operators, and fulfilling relevant compliance management responsibilities. The compliance officer shall possess the following compliance management capabilities:

Master the relevant laws and regulations on anti monopoly in the concentration of business operators;

Having professional knowledge in identifying and preventing antitrust legal risks associated with concentration of operators;

Familiar with the entire business process of internal investment and mergers and acquisitions for operators;

Understand the competitive situation in the market where the operator's main business operates;

Other required compliance management capabilities.

Operators can designate senior management personnel responsible for compliance and legal affairs in the management team as compliance leaders, assign corresponding responsibilities and authorities, provide necessary working conditions, job benefits, and education and training, and ensure their performance of anti monopoly compliance management responsibilities in the concentration of operators.

Article 23 Key Personnel

The investment, legal, financial and other departments closely related to investment and merger and acquisition business within the operator are key positions in the anti monopoly compliance management of the concentration of operators. Suggest key personnel to do the following:

Be aware of relevant laws and regulations on concentration of business operators;

Comply with anti monopoly compliance management requirements for concentration of operators;

Participate in anti monopoly compliance training for concentration of operators;

Cooperate in providing relevant materials required for compliance;

Other compliance related work.

Article 24 Risk Identification and Assessment

It is recommended that operators embed anti monopoly compliance review procedures for concentration of operators in their investment and merger decision-making and execution processes, identify and evaluate legal risks related to concentration of operators, prepare for declaration in advance, and take corresponding risk prevention measures. Encourage operators to identify and evaluate potential antitrust legal risks associated with concentration of operators at an earlier stage, such as formulating investment and merger plans and conducting investment and merger negotiations.

Article 25 Risk Response

Encourage operators to establish anti monopoly compliance risk response mechanisms for concentration of operators, and formulate corresponding disposal measures for different legal risks, mainly including the following aspects:

If the concentration of business operators meets the declaration standards, they shall promptly fulfill their declaration obligations in accordance with the law, reserve necessary time for the declaration review work, and ensure that concentration is not implemented before declaration and approval;

If it is found that the proposed transaction may have the effect of excluding or restricting competition, timely adjust the trading plan, trading structure, or take other necessary measures to reduce the adverse impact of the transaction on market competition;

If the State Administration for Market Regulation deems that a concentration of business operators has or may have the effect of excluding or restricting competition after application, the business operators shall propose additional restrictive conditions as soon as possible;

If it is found that it may constitute illegal implementation of concentration of operators, relevant activities shall be stopped in a timely manner and communication with the State Administration for Market Regulation shall be made, and relevant work shall be actively cooperated with.

Chapter 5 Compliance Management Guarantee

Article 26 Compliance Commitment

Encourage operators to establish anti monopoly compliance commitment mechanisms for concentration of operators. Compliance commitments can enhance the awareness and importance of antitrust legal risks in business concentration among decision-makers and senior management, ensuring effective implementation of compliance management.

Business decision-makers, senior management, and key personnel in investment departments can make anti monopoly compliance commitments for business concentration, or include anti monopoly compliance content in the overall compliance commitment. Operators can specify the adverse consequences of relevant personnel violating compliance commitments in their internal personnel management system.

Article 27 Compliance Reports

Operators can establish an anti monopoly compliance reporting mechanism for concentration of operators, or include anti monopoly compliance matters in the overall compliance report. The compliance officer may regularly report to the decision-making or senior management of the operator on the anti monopoly compliance situation of the concentration of operators. When significant compliance risks arise, the compliance officer shall promptly report to the decision-making or senior management of the operator and propose risk response suggestions.

Encourage operators to report to the State Administration for Market Regulation and provincial market supervision departments on the anti monopoly compliance situation and progress of concentration of operators, including the construction of compliance management systems, staffing of compliance personnel, compliance audit records, compliance publicity and training, third-party evaluation, as well as recent applications and penalties. Provincial market supervision departments can regularly understand the compliance management situation of operators in their jurisdiction, and provide necessary support and guidance to operators.

Article 28 Compliance Evaluation

Encourage operators to regularly evaluate the effectiveness of the anti monopoly compliance management system for concentration of operators in appropriate ways, continuously improve the compliance management system, and enhance the compliance management system.

The effectiveness evaluation of the anti monopoly compliance management system for concentration of operators can include the following aspects:

Establish a clear and executable compliance management system and process;

Equip a compliance officer with clear responsibilities;

Establish clear compliance reward and punishment mechanisms and measures;

Compliance audits are comprehensively, fully, and effectively implemented;

Other information regarding compliance and effective operation.

Article 29 Compliance Consultation

Operators can establish a centralized anti-monopoly compliance consultation mechanism. Encourage relevant personnel of business operators to consult the compliance management department or compliance officer as soon as possible regarding compliance issues encountered during the concentration process. Operators can seek compliance advice from external legal experts, professional institutions, etc., and can also negotiate and consult with the State Administration for Market Regulation and relevant provincial market supervision departments on matters such as declaring concentration of operators.

The State Administration for Market Regulation and provincial market supervision departments guide operators to do a good job in relevant compliance, declaration, and other work.

Article 30 Compliance Training

Encourage operators to carry out centralized compliance promotion and training through various forms such as expert lectures and issuing manuals, guide and supervise relevant personnel of operators to improve their compliance awareness and ability, and enhance the efficiency of compliance management.

Encourage business operators to provide basic knowledge training on business concentration to decision-makers and senior management personnel, and provide professional training and assessment on business concentration to compliance officers and key personnel.

The State Administration for Market Regulation and provincial-level market supervision departments will strengthen the promotion and training of anti monopoly compliance for concentration of operators, and guide operators to do a good job in compliance management.

Article 31 Compliance Rewards and Punishments

Encourage operators to establish an internal anti monopoly compliance reward and punishment mechanism for concentration of operators, and commend and reward compliance leaders and key personnel who have achieved significant compliance results. When operators engage in significant violations of concentration of operators, necessary punishment shall be given to compliance leaders or key personnel who fail to fulfill their compliance responsibilities prudently.

Article 32 Compliance incentives

To encourage operators to actively carry out anti monopoly compliance in business concentration, the State Administration for Market Regulation may consider the construction and implementation of anti monopoly compliance management systems for business concentration when investigating and punishing illegal concentration activities.

Article 33: