Major Acquisition Approval Offers Procedural Insights on China s New Antimonopoly Law

Transcription

1 December 2008 / Special Alert A legal upate from Dechert s Mergers an Acquisitions an Antitrust Groups Major Acquisition Approval Offers Proceural Insights on China s New Antimonopoly Law China s Ministry of Commerce (MOFCOM) announce on November 18, 2008 that, subject to certain conitions, it ha approve uner China s new Antimonopoly Law the acquisition of the American-base Anheuser-Busch Companies Inc. ( Anheuser-Busch ) by the Belgium company InBev N.V./S.A. ( InBev ). The announcement (MOFCOM Announcement No. 95) is the first public announcement by MOFCOM approving a major acquisition uner the new Antimonopoly Law, which went into effect on August 1, In connection with Announcement 95, MOFCOM publishe to its website an article proviing new comments an insights on the specific proceures it currently follows for review of merger control filings. Backgroun of Antimonopoly Law The Antimonopoly Law was the result of 13 years of rafting an consieration by the Chinese government. The law is the first comprehensive antitrust legislation in China an stans to make China a thir center for antitrust review (along with the U.S. an the EU) for large-scale global mergers an acquisitions. The Antimonopoly Law efines a concentration of business operators as a merger with, or the acquisition of controlling rights in, another business operator through an equity or asset acquisition, or through contractual arrangements. If the concentration of business operators reaches certain threshols triggering a merger control filing, a prior notification must be file with MOFCOM an the transaction may procee only with MOFCOM s approval. The relevant threshols are not stipulate in the new law itself, but they are lai out in the State Council Regulation on Notification of Concentration of Business Operators (the State Council Regulation ). The State Council Regulation requires a merger control filing if, uring the previous fiscal year, (1) the total global revenue of all business operators participating in the concentration exceee RMB10 billion, an at least two of the business operators participating in the concentration each ha revenue of more than RMB400 million in China, or (2) the total revenue in China of all business operators participating in the concentration exceee RMB2 billion, an at least two of the business operators participating in the concentration each ha revenue of more than RMB400 million in China. Article 27 of the Antimonopoly Law specifies the factors that MOFCOM shoul consier in making its antitrust review, incluing, for example, the egree of concentration in

2 the relevant markets, the market share of the participants to the propose concentration, the effect on consumers, the effect on market access, the effect on technological evelopment, an the effect on national economic evelopment. InBev/Anheuser-Busch Merger MOFCOM s approval of InBev s US$52 billion acquisition of Anheuser-Busch came less than one week after the U.S. Department of Justice grante its approval. InBev mae its initial submission to MOFCOM on September 10, 2008 an mae two supplemental filings in October. As such, the entire formal review process took slightly more than one month. Uner Article 29 of the Anti-Monopoly Law, MOFCOM may approve a concentration subject to restrictive conitions. MOFCOM exercise that authority in this transaction. MOFCOM s consent is subject to four conitions: InBev may not increase Anheuser-Busch s 27% stake in the Tsingtao Brewery Group; InBev must forthwith report to MOFCOM any change in its controlling shareholers; InBev may not increase its 28.56% stake in Zhujiang Brewery Group; an InBev may not seek a stake in either China Resources Breweries Co. or Yanjing Brewery Co. MOFCOM Clarification of Proceural Issues In connection with approval of the InBev/Anheuser- Busch acquisition, MOFCOM publishe on its website an article, base on comments by the chief of the antitrust bureau, proviing insights into the specific proceures it is currently following for merger control reviews. In China, it is not unusual for basic laws (such as the Antimonopoly Law) to leave consierable iscretion about the etails of the implementing process an proceure to the enforcing authorities. Thus far, the Chinese legislative authorities have not issue etaile formal implementing regulations for the Antimonopoly Law. 1 The MOFCOM publication provies an inication of its current thinking on proceural issues, an about the process that shoul be followe for a merger control filing in the absence of a specific implementing regulation. Prior to the Antimonopoly Law, a general mergers an acquisitions regulation, the Regulations for Merger with an Acquisition of Domestic Enterprises by Foreign Investors (the M&A Rules ), containe the relevant rules for merger control filings involving foreign investors. Until the new implementing regulations for the Antimonopoly Law are issue, the MOFCOM publication irects filers to ahere to the proceures issue by MOFCOM to implement the M&A Rules. With respect to the ocuments require as part of a merger control filing, MOFCOM emphasize that the list of ocuments set forth in Article 23 of the Antimonopoly Law is not an exhaustive list. Instea, MOFCOM mae clear that it woul exercise the authority expressly grante to it in Article 23 to request ifferent an aitional ocuments on top of those require expressly in the law itself. In terms of the nature of these aitional ocuments, MOFCOM emphasize that they woul be etermine on a case-by-case basis, given its view that each merger or acquisition raises unique issues. As such, filers will currently have to contact MOFCOM to etermine in etail what ocuments they will nee to submit as part of their submissions. However, the publication also states that MOFCOM is currently expeiting its work on implementing regulations esigne to clarify in a more formal fashion the basic list of require ocuments. The publication also states that MOFCOM woul implement a pre-filing consultation process for merger control filings, in which filers can submit written questions to MOFCOM on a case-by-case basis about the materials they shoul submit in connection with a propose merger an that MOFCOM woul reply to such questions. The publication also shes further light on how future ecisions on propose mergers will be announce. MOFCOM clarifie that the law oes not require it to make any formal announcement when a merger filing has been accepte an a review process is unerway. 1 The implementation regulations may be enacte by the National People s Congress, the State Council, or MOFCOM. The proceural rules for review merger control filing will be promulgate by MOFCOM. December 2008 / Special Alert 2

3 Instea, MOFCOM will notify the parties privately when their filing has been accepte, an in some cases this notification may be oral only. In terms of announcing ecisions, the Antimonopoly Law expressly requires MOFCOM to make public announcements of its ecisions in two circumstances: when it bars a propose transaction entirely, an when (as with InBev) its approval is subject to conitions. The publication clarifies that MOFCOM woul not make public announcements except in the two circumstances when it is require to o so by the Antimonopoly Law. If the transaction is approve outright, MOFCOM will notify the parties only an no public announcement will be mae. Accoring to the MOFCOM article, the types of restrictive conitions MOFCOM will consier fall into three categories: structural conitions which compel business operators to ivest certain assets prior to the concentration; behavioral conitions which prohibit the merge entity from practices that may have an anticompetitive effect; an hybri remeies combining both structural an behavioral elements. The MOFCOM article also provies a sense of the wieranging review proceures that MOFCOM woul consier in unertaking its merger control reviews. MOFCOM state that it may hol public hearings an forums in the future. It may also consult irectly with other central government agencies, relevant local governments, inustry associations, an omestic enterprises in the relevant market before coming to a ecision. Conclusion The relatively rapi spee with which MOFCOM approve the InBev/Anheuser-Busch acquisition was reassuring to the international community. However, one of the concerns about the new Antimonopoly Law has been the protectionist flavor of some of its requirements, in particular the provision permitting the consieration of national economic evelopment as part of the review. The restrictive conitions place by MOFCOM on the transaction, prohibiting InBev from engaging in future acquisitions of specific local brans, have increase concern that the Antimonopoly Law may be applie in a protectionist fashion. The InBev transaction is only the first publishe MOFCOM ecision uner the new law, an the precise nature of MOFCOM s review will take some time to unfol. In the meantime, the MOFCOM publication issue in connection with the InBev filing provies aitional guiance on the proceures to be followe when seeking MOFCOM s approval for a propose acquisition uner the new Antimonopoly Law. Legal upate authors This upate was authore by: Henry Wang henry.wang@echert.com Jason Golberg jason.golberg@echert.com liang.tsui@echert.com Lynn Teng lynn.teng@echert.com December 2008 / Special Alert 3

4 Practice group contacts If you have questions regaring the information in this legal upate, please contact the Dechert attorney with whom you regularly work, or any of the attorneys liste. Visit us at or Mergers an Acquisitions Alain Decombe Paris alain.ecombe@echert.com Eric Deltour eric.eltour@echert.com Douglas L. Getter Lonon ouglas.getter@echert.com Richar A. Golberg New York richar.golberg@echert.com Ian A. Hartman Philaelphia ian.hartman@echert.com Basil H. Hwang basil.hwang@echert.com William G. Lawlor Philaelphia william.lawlor@echert.com Martin Nussbaum New York martin.nussbaum@echert.com Feerico G. Pappalaro Munich feerico.pappalaro@echert.com Davi E. Schulman avi.schulman@echert.com liang.tsui@echert.com Henry Wang henry.wang@echert.com Antitrust Jeffrey W. Brennan jeffrey.brennan@echert.com Stephen D. Brown Philaelphia stephen.brown@echert.com Peter R. Crockfor Lonon peter.crockfor@echert.com Paul T. Denis paul.enis@echert.com H. Joseph Escher III San Francisco h.joseph.escher@echert.com Michael D. Farber michael.farber@echert.com Carolyn H. Feeney Philaelphia carolyn.feeney@echert.com James A. Fishkin james.fishkin@echert.com Paul H. Frieman paul.frieman@echert.com George G. Goron Philaelphia george.goron@echert.com Robert C. Heim Philaelphia robert.heim@echert.com Kevin T. Kerns Philaelphia kevin.kerns@echert.com Ewar L. Kling Lonon ewar.kling@echert.com Christine C. Levin Philaelphia christine.levin@echert.com Pierre-Manuel Louis pierre.louis@echert.com December 2008 / Special Alert 4

5 Isabelle M. Rahman isabelle.rahman@echert.com Will Sachse Philaelphia will.sachse@echert.com Stephen A. Stack, Jr. Philaelphia stephen.stack@echert.com Joseph A. Tate Philaelphia joseph.tate@echert.com liang.tsui@echert.com D Dechert LLP. All rights reserve. Materials have been abrige from laws, court ecisions, an aministrative rulings an shoul not be consiere as legal opinions on specific facts or as a substitute for legal counsel. This publication, provie by Dechert LLP as a general informational service, may be consiere attorney avertising in some jurisictions. Prior results o not guarantee a similar outcome. U.S. Austin Boston Charlotte Hartfor Newport Beach New York Philaelphia Princeton San Francisco Silicon Valley EUROPE Lonon Luxembourg Munich Paris ASIA December 2008 / Special Alert 5