China Competition Bulletin

Transcription

1 China Competition Bulletin The China Competition Bulletin summarises the latest developments of competition and regulatory policy in the People s Republic of China, covering laws and policies, cases, agency and other relevant news, and selected publications I. Laws and Policies 1. MOFCOM Invited Comments on the Interim Provisions on the Assessment of Competitive Effects of Concentrations of Undertakings (MOFCOM, 3 June 2011) The MOFCOM issued the draft Interim Provisions on the Assessment of Competitive Effects of Concentrations of Undertakings (Merger Assessment Rules) on 3 June 2011 and invited public comments. The consultation period ended on 13 June The draft Merger Assessment Rules are formulated pursuant to the AML and provide that the MOFCOM should, where relevant to the circumstances of the case, comprehensively assess the competitive effects of a merger pursuant to the factors listed in Article 27 of the AML. When assessing a merger, the MOFCOM will first consider whether the merger will cause or strengthen a single undertaking s ability to eliminate or restrict competition (unilateral effects). If the relevant market is controlled by a few undertakings, the MOFCOM will consider whether the merger will cause or strengthen the undertakings collective ability to eliminate or restrict competition (coordinated effects). For vertical and conglomerate mergers, the MOFCOM will assess the adverse effect of the merger on the upstream, downstream, and neighbouring markets (foreclosure effects and portfolio effects). The draft Merger Assessment Rules state that the market share of the merging parties is an important indicator of market power and the level of concentration in the market (measured by the Herfindahl-Hirschman Index and concentration ratios) and will be a significant consideration in the MOFCOM s merger review. The draft Merger Assessment Rules also provide a list of the other factors relevant to the assessment of market power. These include the competitive situation of the market, whether the merging parties are close competitors, whether other undertakings in the market have surplus capacity, countervailing buyer power, and any financial and technological advantages of the merging parties. The draft Merger Assessment Rules also consider the effect of a merger on market entry, technological progress, consumer welfare, upstream and downstream market participants, the national economy, and public interest. The efficiency defence (such as economies of scale and scope and cost reduction) and the failing firm defence are also recognised in the draft Merger Assessment Rules. 中国竞争简报 A publication of the China Competition Research Centre Edition 10: June 2011 Editors Professor Allan Fels, AO 艾伦. 菲尔斯 Dean, The Australia and New Zealand School of Government Former Chairman, the Australian Competition and Consumer Commission a.fels@anzsog.edu.au Professor Xiaoye Wang 王晓晔 Institute of Law Chinese Academy of Social Sciences Head of the Competition Law Committee, China Law Society Deputy Head of the Economic Law Section, China Law Society wangxiaoye88@yahoo.com.cn Dr Jessica Su 苏华 Postdoctoral Fellow, Institute of Law, Chinese Academy of Social Sciences Research Consultant to Professor Allan Fels jessica.hua.su@gmail.com (in Chinese) News report by Global Competition Review available at: In this edition I. Laws and Policies 1-2 II. Cases 2-3 III. News of the Anti-Monopoly Enforcement Agencies and the Courts 3-5 IV. Central and Local Government News 5 V. Selected Publications in Chinese 5 Major Acronyms 6

2 2. MOFCOM Invited Comments on the Interim Measures on Investigating and Handling of Concentrations Not Notified in Accordance with the Law (MOFCOM, 13 June 2011) The MOFCOM issued the draft Interim Measures on Investigating and Handling of Concentrations Not Notified in Accordance with the Law (Measures) on 13 June 2011 and invited public comments. The consultation period ended on 23 June Formulated pursuant to the AML and the State Council Rules on Notification Thresholds for Concentrations of Undertakings, the draft Measures provide procedural rules and sanctions against the suspected failure to notify a concentration in violation of the mandatory filing obligation under the AML. In particular, the Measures provide that any entity or individual may report any suspected violations to the MOFCOM and that, if the report is in writing and supported by the relevant facts and evidence, the MOFCOM will conduct necessary investigations on the reported matters. (in Chinese) News report by Global Competition Review available at: II. Cases 1. MOFCOM Conditionally Approves the Acquisition of Silvinit by Uralkali (MOFCOM, 2 June 2011) On 2 June 2011, the MOFCOM conditionally approved Uralkali s proposed US$1.4 billion acquisition of Silvinit, both of which are Russian potash companies. The MOFCOM imposed a set of behavioural remedies. The MOFCOM accepted the notification and commenced its preliminary review on 14 March 2011, began further review on 12 April 2011, and approved the transaction on 2 June During the review, the MOFCOM solicited comments and opinions from relevant government departments, trade associations, manufacturers, trading companies, and industry experts on the affected products, distribution of potassium resources, market definition, market structure, and business models. The MOFCOM defined the relevant product market to be potassium chloride. It found that the production of potassium chloride relies on the distribution of potassium resources and that both the production of potassium chloride and the distribution of potassium resources are concentrated in a number of countries. China heavily relies on imported potassium chloride, and Uralkali, Silvinit, and their affiliated entities supply half of such imports. The merged entity would become the world s second largest export supplier of potassium chloride with a share of more than one third of the global market, and the top three global suppliers would account for 70% of the global market. The MOFCOM considered that the merged entity would have stronger production capacities and control of the global potassium chloride market, and that the merger would make coordinating behaviour between the participants in the global potassium chloride market more likely, thereby leading to the elimination or restriction of competition. The MOFCOM raised these competition concerns on 11 May 2011 to the notifying party, who then submitted proposed remedies. The remedies were settled after a series of four meetings between the MOFCOM and the notifying party. The MOFCOM accepted the remedies on 20 May 2011 and were satisfied that the remedies could reduce the adverse impact of the proposed merger on competition. The following behavioural conditions were imposed on the merged entity: (1) to continue its current practices of sales of potassium chloride in China and to make efforts to stably and reliably supply the Chinese market through railway and sea transportation; (2) to continue to meet Chinese customers demand for sufficient and all types of potassium chloride; (3) to continue its usual negotiation procedures and, with respect to price negotiations, to fully take into account its past commercial relationship with its Chinese customers, the present, and the unique features of the Chinese market; and (4) to report its performance of the relevant commitments to the MOFCOM every six months or upon the MOFCOM s request. 2

3 MOFCOM s announcement available at: (in Chinese) Comments by Freshfields Bruckhaus Deringer LLP available at: News report by Global Competition Review available at: 2. Diageo Gains Regulatory Approval for Majority Shareholding in Quanxing (various sources, 27 and 28 June 2011) On 27 June 2011, Diageo confirmed that it had received approval from the MOFCOM to acquire an additional 4% stake in Sichuan Chengdu Quanxing Group Company Ltd (Quanxing) from Chengdu Yingsheng Investment Holding Co., Ltd. Once completed, Diageo s holding in Quanxing will be increased to 53%. Quanxing is the largest shareholder of Sichuan Shui Jing Fang Co., Ltd (Shui Jing Fang), which is listed on the Shanghai Stock Exchange. Diageo is now seeking approval from the China Securities Regulatory Commission to launch the required mandatory tender offer for the outstanding shares of Shui Jing Fang, in which Quanxing owns a 39.7% stake. Shui Jing Fang is a small, high-end brand of Chinese white spirit and has distilleries with more than 3,000 years of history. To address potential competition concerns, the parties had agreed to spin off its more famous Quanxing white spirit brand in February (in Chinese) Background information: Diageo s Hopes Rise Over Baijiu Move, China Competition Bulletin, Edition 7, March 2011, page 3. III. News of the Anti-Monopoly Enforcement Agencies and the Courts 1. Investigating Major Cases and Protecting the People s Livelihood the SAIC Releases Statistics on Competition Enforcement in 2010 (SAIC, 18 May 2011) In 2010, the SAIC issued the Notice on Further In-depth Investigations on Restrictive Competitive Behaviour of Public Utilities and Big Retailers to local administrations for industry and commerce (AICs), which set out the requirements and arrangements for the local AICs enforcement work against restrictions on competition and unfair trading behaviour. In May 2011, the SAIC held a working conference on competition enforcement and economic investigations and requested that all competition enforcement units under the SAIC and the local AICs continue to focus on the people s livelihood and to further regulate monopolistic sectors such as electricity, water, gas, cable television, and transport. According to the SAIC, the local AICs investigated and handled 2168 cases in 2010, which largely comprised of unfair trading by dominant retailers and designated transactions and abusive prices charged in the cable television, health care, gas, heating, electricity, telecommunications, transport, banking, and tobacco sectors. Link: (in Chinese) 3

4 2. EU-China Competition Week Held from 1 to 7 June 2011 in Beijing (various sources, June 2011) The EU-China Competition Week was launched in 2009 and is a twice-yearly week of meetings and seminars that provide a forum for discussion and cooperation on competition policy between the European Union and China. The first EU-China Competition Week 2011 was held in Bejing during the week beginning 1 June The week was opened by Mr Peng Sen, Deputy Commissioner of the NDRC, and Mr Cecilio Madero Villarejo, Deputy Director-General of the DG Competition of the European Commission. Mr Peng Sen, Deputy Commissioner of the NDRC, said at the opening remarks that price monopoly agreements are the enforcement priority of the NDRC and emphasised the need for further studies on the boundaries of illegal behaviour and the finding of meeting of minds between undertakings. Some of the sessions conducted during the week included a high-level international seminar and two separate workshops with NDRC officials on price-fixing, a workshop with SAIC officials on market dominance with a particular focus on the information, technology, and communications sector, and two workshops with MOFCOM officials on the notion of control and simplified merger control procedures. During the week, Mr Zhong Youping, Deputy Commissioner of the SAIC met with Mr Cecilio Madero Villarejo. Mr Zhong introduced the SAIC s AML enforcement work and invited the EU Commission to attend the 2nd Brazil, Russia, India, China (BRIC) Competition Conference, which will be held by the SAIC in 2011 in Beijing. The two parties also exchanged opinions regarding the signing of the China-EU Competition Cooperation Memorandum of Understanding. Mr Shang Ming, Director General of the Anti-Monopoly Bureau of the MOFCOM also met with Mr Madero Villarejo during the week to exchange opinions on the China-EU competition dialogue and other related matters. Report by EU-China Trade Project II available at: Coverage on the China Central Television available at: (in Chinese) Reports by NDRC, SAIC and MOFCOM available at: (in Chinese) 3. The Office of the State Council Anti-Monopoly Commission Formally Established under the MOFCOM (MOFCOM, 9 and 15 June 2011) On 9 June 2011, the MOFCOM announced that the State Council had formally approved the official establishment of the Office of the State Council Anti-Monopoly Commission (AMC Office) under the MOFCOM. Mr. Yao Jian, spokesperson for the MOFCOM, said that the AMC Office has been situated within the MOFCOM since the establishment of the Anti-Monopoly Commission in August The formal establishment of the AMC Office within the MOFCOM will improve the effectiveness of AML enforcement, enhance the coordination among the various ministries of which the AMC is comprised, and more effectively promote economic development. News release by MOFCOM: (in Chinese) Script of the MOFCOM monthly press conference: (in Chinese) 4

5 4. Yum s Buyout of Little Sheep Notified to the MOFCOM for Anti-Monopoly Review (MOFCOM, 15 June 2011) Mr Yao Jian, spokesperson for the MOFCOM, stated that the acquisition of the Little Sheep Group by Yum Brands Inc. has been notified to the MOFCOM and that the notification materials were being reviewed. According to Mr Yao, the Little Sheep Group s turnover in China was approximately CNY 1.8 billion in 2010 and, as of the end of 2010, it operated 179 restaurants and franchised 274 restaurants in China. Link: Script of the MOFCOM monthly media conference: (in Chinese) Background information: Yum s Buyout of Little Sheep Requires Anti-Monopoly Review, China Competition Bulletin, Edition 9, May 2011, page 3. IV. Central and Local Government News 1. The Ministry of Industry and Information Technology s (MIIT) First Seminar on Intellectual Property, Standards, and Anti-Monopoly Law (Electronics Intellectual Property Center, MIIT, May 2011) On 26 and 27 May 2011, the MIIT organised the First Seminar of Intellectual Property, Standards, and Anti-Monopoly Law in Beijing. Representatives from the NDRC, the MOFCOM, the SAIC, the State Intellectual Property Office, and the National Standards Commission participated in the conference. There were also 200 attendees from the United States, European Union, and Japan. Link: (in Chinese and English) V. Selected Publications in Chinese 1. 王晓晔 : 反垄断法, 法律出版社 2011 年版 (Xiaoye Wang, Anti-Monopoly Law, China Law Press, 2011) This is a comprehensive and accessible textbook on competition law suitable for postgraduate students and practitioners. The author, based on her two-decades of research and teaching, reviews the relationship between the market economy and competition and the development of competition law in the United States, the European Union, other OECD member states, and developing and transitional countries. The author provides comprehensive analyses on key components and enforcement of the AML, explains the economic and legal context within which the AML operates, and examines the relationship between intellectual property rights and the AML and sectoral regulation and the AML. The author also assesses the treatment on the abuse of administrative powers to restrict competition in the United States, the European Union, Russia, and China, and discusses extraterritoriality and international cooperation of competition law enforcement. Further information of the book available at: (in Chinese) 5

6 Major Acronyms AML MOFCOM NDRC SAIC PRC Anti-Monopoly Law 2007, PRC Ministry of Commerce, PRC (MOFCOM is one of China s three competition enforcement agencies which applies the AML and is responsible for enforcing the merger control regime under the AML.) National Development and Reform Commission, PRC (NDRC is one of China s three competition enforcement agencies which applies the AML and is responsible for enforcing price-related infringements of the AML in the areas of restrictive agreements and abuse of dominant market position.) State Administration for Industry and Commerce, PRC (SAIC is one of China s three competition enforcement agencies which applies the AML and is responsible for enforcing non price-related infringements of the AML in the areas of restrictive agreements and abuse of dominant market position.) People s Republic of China Disclaimer: *By clicking on the links you are entering third party websites. Please refer to the relevant websites for terms and conditions of use. *This publication provides general information only. ccrc@anzsog.edu.au to unsubscribe 6