Merger Control Survey 2014 IFLR international financial law review MERGER CONTROL SURVEY 2014 Guest edited by Nicole Kar
RISK RATING MAP Asia Pacific: risk rating map Key Indicates a regime in which regulation is predictable and light touch Indicates a regime in which regulation is generally predictable or moderately intrusive Indicates a regime in which regulation is unpredictable or highly intrusive Filing Penalties Clearance *Please note that responses to section 1 and section 2.5 are not rated CHINA SOUTH KOREA INDIA AUSTRALIA 62 IFLR SURVEY MERGER CONTROL 2014
CHINA China Clara Ingen-Housz and Fay Zhou, Linklaters www.linklaters.com Section 1: REGULATORY FRAMEWORK 1.1 What is the applicable legislation and who enforces it? The Anti-Monopoly Law (AML), which entered into force on August 1 2008, is the main legislation governing Chinese merger control. Merger control is solely enforced by the Ministry of Commerce (Mofcom). 1.2 What types of transaction are caught? Provided turnover thresholds are met, the following concentrations of undertakings are caught: mergers; undertakings acquiring control over one or more undertakings by acquiring equity interests or assets; and undertakings acquiring control or exerting decisive influence over one or more other undertakings by contract or other means. Section 2: FILING 2.1 What are the thresholds for notification? Concentrations must be notified to Mofcom if: the combined aggregate worldwide turnover of all the undertakings in the last financial year is more than Rmb10 billion ($1.6 billion), and the turnover within the People s Republic of China (PRC) of each of at least two of the undertakings in the last financial year is over Rmb400 million; or the combined aggregate PRC turnover of all the undertakings in the last financial year is more than Rmb2 billion, and the PRC turnover of each of at least two of the undertakings in the last financial year is over Rmb400 million. 2.2 How clear are the filing requirements? Please also note whether filing is mandatory or voluntary When the thresholds are met, filing is mandatory. Because thresholds are defined by reference to the relevant parties turnover, it is relatively clear when a filing will be required. However, Mofcom also has jurisdiction to investigate transactions that do not meet the turnover thresholds. 2.3 Does the merger regime extend to transactions taking place outside your jurisdiction and if so to what extent does there need to be local effect? Whether the transaction between foreign parties will have an impact on competition in China is taken into consideration in the context of the substantive review. A transaction with no competitive effect on China at all is likely to enjoy speedier clearance. Finally, transactions which have no nexus with China will likely qualify as a simple case (according to the draft Simple Cases Standards regulation which is likely to be finalised in 2014) and may be reviewed under a simplified procedure. 2.4 How onerous are the filing requirements? Managing a case until clearance can be onerous. Requirements for a filing include complex analysis and detailed information concerning suppliers and customers. Once a filing is submitted, Mofcom may also send multiple follow-up requests for information. 2.5 On whom does the burden to file fall, and are there filing fees? All merging business operators are responsible for filing mergers. For all other acquisitions of control, the filing will be made by the business operator acquiring control or exercising decisive influence. Other undertakings to the transaction have an obligation to assist with the filing. There are currently no filing fees. Section 3: PENALTIES 3.1 At what level does your authority have jurisdiction to review and impose penalties for failure to notify deals? We understand that Mofcom has investigated suspected failures to notify in nine cases and had closed two such cases (as of October 2013). Sanctions imposed by Mofcom in such cases were not made public but could include warnings, orders to submit a filing, and fines. The maximum fine for failure to notify is Rmb500,000. Generally speaking, sanctions are likely to be imposed on the buyer only. The seller could be affected if the parties are ordered to restore the situation to what it was prior to the concentration. Failure to notify may also cause significant damage to the relationship with the PRC government. For the Chinese merger regime to apply to foreign-to-foreign transactions, at least two of the undertakings must have local PRC turnover of at least Rmb400 million. For acquisitions of sole control, a filing can therefore be ruled out if the target does not have local turnover. For joint ventures, a filing cannot be ruled out if the turnover of at least two controlling parent companies exceeds the relevant turnover thresholds, even when the target has no PRC turnover. IFLR SURVEY MERGER CONTROL 2014 63
CHINA Section 4: CLEARANCE 4.1 How advanced is the test for clearance? 4.2 What level of opportunity exists for the decision to be appealed? Although it does not have a mature merger review regime, Mofcom has managed to show there are consistent factors that are taken into account when considering clearance. Under the AML, a concentration must be prohibited if it is likely to eliminate or restrict competition. Mofcom has become increasingly comfortable with applying concepts such as unilateral and coordinated effects. However, uncertainty in the test for clearance is created by limited information being provided in published decisions. Dissatisfied parties must appeal to Mofcom for administrative reconsideration. If still dissatisfied, parties may challenge Mofcom s decision before the People s Court. To date, no Mofcom decision has been the subject of administrative reconsideration, let alone an appeal. Clara Ingen-Housz Partner, Linklaters Hong Kong T: +852 2901 5306 E: cih@linklaters.com W: www.linklaters.com Clara is an antitrust partner in our Hong Kong office, advising multinational companies on Asian competition law issues, and Asian companies on global antitrust matters. Her experience of close to 15 years spans three continents. In Europe, she was a member of the Competition Department of the Legal Service at the European Commission, advising and litigating on behalf of the Commission on merger, cartel and abuse cases in a wide range of industries. In the US, she practised for close to ten years at top-tier New York firms, focusing on US merger control and private antitrust litigation. In Asia since 2010, Clara has developed a strong regional competition practice with specific expertise in China and Hong Kong. She is connected to the regulators across the region and has been involved in transactions and investigations in a number of jurisdictions including China, Singapore, Vietnam, Indonesia, Korea, Taiwan, and Australia. She has significant experience in multijurisdictional merger filings, anti-competitive agreements, dominant firm analysis, distribution network structuring and compliance. She also has a broad array of industry knowledge, including in the pharmaceutical, airline, infrastructure, energy/natural resources and IT sectors. Fay Zhou Counsel, Linklaters Beijing, China T: +861065350686 E: fay.zhou@linklaters.com W: www.linklaters.com Fay Zhou is a counsel in the competition group in Linklaters Beijing office. Her practice includes advising both multinational and Chinese clients concerning antitrust and other regulatory issues. Fay has focused herself in assisting clients with merger control and competition compliance strategies. She also frequently advises clients dealing with government investigations and litigation matters on cartel activities and abuse of dominance. Fay previously served in the Chinese Ministry of Commerce for eight years. While serving as a section chief in the Bureau of Fair Trade for imports and exports, she participated in many high-profile fair trade investigations and legislative initiatives, and has acquired a thorough understanding of the dynamic regulatory environment in China. After receiving her LLM from Harvard Law School, she practiced with other international law firms in Washington and Beijing for a number of years before joining Linklaters. She is qualified to practice law in China and the New York state. 64 IFLR SURVEY MERGER CONTROL 2014
INDIA India Vinod Dhall, Talwar Thakore & Associates in collaboration with Vinod Dhall Section 1: REGULATORY FRAMEWORK 1.1 What is the applicable legislation and who enforces it? The Competition Act, 2002 (Act) is the principal legislation governing merger control in India. It is enforced by the Competition Commission of India (CCI), which has for this purpose produced the CCI (Procedure in Regard to the Transaction of Business relating to Combinations) Regulations (Regulations). 1.2 What types of transaction are caught? Under the Act, a transaction would fall within the jurisdiction of the CCI only if it qualifies as a so-called combination. A combination is defined as any acquisition or merger/amalgamation above the specified thresholds. In practice, a transaction may require notification, even when it does not confer or transfer any competitively relevant influence. The Regulations do, however, set out categories of transactions that need not be notified since such combinations are ordinarily not likely to adversely affect competition. Section 2: FILING 2.1 What are the thresholds for notification? The jurisdictional thresholds are multi-faceted. First, different thresholds apply to the entities directly involved in a transaction and to the group to which the target will belong following completion. Second, the thresholds reference assets as well as turnover. Finally, each of these criteria is referenced for India as well as worldwide. In the latter case, a subordinate set of thresholds within India must also be crossed. Where any one of these thresholds is exceeded, the transaction would qualify as a combination. In addition to the above, the Government of India has clarified that a notification will not be required if either of the target s assets or the target s turnover in India is less than Rs2.5 billion ($40 million) or Rs7.5 billion, respectively. This exemption is available until March 3 2016. 2.3 Does the merger regime extend to transactions taking place outside your jurisdiction and if so to what extent does there need to be local effect? The CCI has the jurisdiction to review international transactions between firms based outside the country if these exceed the thresholds mentioned in 2.1. However, under the Regulations, deals that take place entirely outside India with an insignificant local nexus and effect on markets in India need not normally be notified. 2.4 How onerous are the filing requirements? The filing requirements are fairly onerous, more so in the case of Form II (long form). Form II notifications are required where: (i) the parties are competitors and the combined market share post-merger exceeds 15%; or (ii) the parties are engaged in vertically related business activities and their individual or combined market shares exceed 25%. All other combinations are filed under Form I. 2.5 On whom does the burden to file fall, and are there filing fees? In the case of an acquisition the acquirer must notify. In the case of a merger or amalgamation, parties to the transaction must notify jointly. Where a notification is made using Form I, the filing fee is Rs1 million. For notification made using Form II, the filing fee is Rs4 million. Section 3: PENALTIES 3.1 At what level does your authority have jurisdiction to review and impose penalties for failure to notify deals? 2.2 How clear are the filing requirements? Please also note whether filing is mandatory or voluntary Notification is mandatory under the Act, and it is required to be done within 30 days of the triggering event. The CCI can impose a fine for a failure to notify, or delay in notifying, a combination, which may extend to one percent of the total turnover or the assets of the combined enterprise, whichever is higher. Where a combination is not notified to the CCI, the CCI has the option to inquire into it within one year of the combination taking effect, unless the combination had taken effect before June 1 2011. IFLR SURVEY MERGER CONTROL 2014 65
INDIA Section 4: CLEARANCE 4.1 How advanced is the test for clearance? 4.2 What level of opportunity exists for the decision to be appealed? The Act prescribes that the CCI should prohibit a combination which is likely to have an appreciable adverse effect on competition (AAEC) on the market. The Act specifies certain factors that the CCI needs to consider when determining whether a combination has an AAEC. Once the CCI has adopted a decision, an aggrieved party may lodge an appeal within 60 days against that decision with the Competition Appellate Tribunal (Compat). A further appeal by the order of Compat can be made to the Supreme Court of India. Vinod Dhall Executive chairman, competition, Talwar Thakore & Associates in collaboration with Vinod Dhall New Delhi, India T: +91 11 4629 9999 F: +91 11 4629 9998 Vinod Dhall was the founding head of the Competition Commission of India, and laid the foundations of the Commission s policies, procedures and organisational model. Thereafter, he set up an independent competition law practice widely regarded as a leading practice in India. Vinod now has a collaboration agreement with Talwar Thakore & Associates combining his competition practice with the latter s awardwinning corporate and finance practice, supported by Linklaters in a best friend relationship. The practice advises and represents several international and Indian clients in antitrust and merger matters. Vinod is executive chairman of the combined competition practice. 66 IFLR SURVEY MERGER CONTROL 2014
SOUTH KOREA South Korea Young Jay Ro and Jung Won Hyun, Kim & Chang www.kimchang.com Section 1: REGULATORY FRAMEWORK 2.4 How onerous are the filing requirements? 1.1 What is the applicable legislation and who enforces it? The primary antitrust and competition law in Korea is the Monopoly Regulation and Fair Trade Law (MRFTA) which regulates merger control in Korea. The MRFTA is enforced by the Korea Fair Trade Commission (KFTC), a ministerial-level central administrative organisation under the authority of the Prime Minister of Korea which functions as a quasi-judicial body. 1.2 What types of transaction are caught? Under the MRFTA, certain types of business combinations, including mergers, share acquisitions, business or asset acquisitions, joint ventures and the appointment of an interlocking director with an unaffiliated company may be subject to merger notification (provided that the parties involved meet certain asset or turnover thresholds). For business combinations between non-korean entities, a Korean turnover nexus must also be satisfied by the parties. A pre-closing filing obligation may also be triggered for business combinations where one of the parties involved has assets or turnover exceeding an additional threshold. There is no official pre-consultation system, and as long as the filing contains major details, the KFTC rarely rejects filings as being incomplete. Once the filing is submitted to the KFTC, however, the KFTC may make extensive requests for additional information or materials, particularly where there are concerns that the business combination may potentially raise anticompetitive issues. 2.5 On whom does the burden to file fall, and are there filing fees? The filing requirement falls on the acquiring entity; in cases of a joint venture formation, however, the party that will hold the largest share in the joint venture company has the obligation to file. In the case of a 50:50 joint venture, if one party files, the KFTC deems that the other party s filing obligation has been also fulfilled. There are no filing fees. Section 3: PENALTIES Section 2: FILING 2.1 What are the thresholds for notification? 3.1 At what level does your authority have jurisdiction to review and impose penalties for failure to notify deals? A business combination is reportable to the KFTC where: (i) one party has total assets or turnover of KRW200 billion ($188 million) or more; and (ii) the other transacting party has total assets or turnover of KRW20 billion or more (size of parties test). For offshore transactions, please see 2.3 for the Korean turnover threshold. 2.2 How clear are the filing requirements? Please also note whether filing is mandatory or voluntary Failure to comply with the filing obligation is subject to administrative fines of up to KRW100 million, that may be adjusted based on any mitigating or aggravating circumstances, including size of the parties, length of delay and any past violations. In addition, if any transaction that failed to be reported comes to the attention of the KFTC, the party must file a business combination report, and separate proceedings to impose administrative fines would be initiated. If the KFTC finds that the transaction raises very serious anti-competitive concerns, it has the authority to order the unwinding of the transaction. Filing requirements are mandatory if the parties to a notifiable business combination satisfy the filing thresholds. For business combinations subject to a post-closing filing requirement, the parties may voluntarily submit a pre-closing filing to the KFTC for preliminary review in order to assess whether the combination has anti-competitive effects. 2.3 Does the merger regime extend to transactions taking place outside your jurisdiction and if so to what extent does there need to be local effect? For offshore transactions involving non-korean parties, a filing is required if both parties satisfy the size of parties test and they both have Korean turnover of KRW20 billion or more. IFLR SURVEY MERGER CONTROL 2014 67
SOUTH KOREA Section 4: CLEARANCE 4.1 How advanced is the test for clearance? 4.2 What level of opportunity exists for the decision to be appealed? The MRFTA prohibits any person from engaging in a business combination that substantially restrains competition in a given area of trade. The KFTC s Merger Review Guidelines provide similar standards to those in the US or in the EU and includes a legal presumption of anticompetitiveness for transactions that meet certain conditions. Where the presumption is exercised, the burden falls on the parties to prove otherwise. Once the KFTC issues its decision on a submitted business combination filing, the filing party may appeal the decision to either to the KFTC for reconsideration, or the Seoul High Court. An appeal to the Seoul High Court may be carried out in parallel with filing an application for reconsideration with the KFTC, both of which are required to be filed within 30 calendar days after the KFTC issues its written decision. The judicial standard of review on appeal is de novo, and new evidence may be submitted and additional factual assertions may be made. Decisions by the Seoul High Court can be appealed before the Supreme Court of Korea. Young Jay Ro Senior Attorney, Kim & Chang Seoul, South Korea T: +822 3703 1029 E: yjro@kimchang.com W: www.kimchang.com Young Jay Ro is a senior attorney in the firm s acquisition finance, capital markets, corporate governance, foreign direct investment, M&A, private equity and venture capital and structured finance practice groups. Since joining the firm in 1988, he has advised a wide range of clients in the areas of M&A, capital market transactions, and finance transactions (including corporate, acquisition and structured financing). He also has broad experience in providing specialised tax planning advice and resolution of tax disputes. He has extensive experience in advising clients in both the finance and corporate area, including major private equity funds, financial institutions and multinational corporations. Ro received his LLB from Seoul National University, College of Law in 1982 and LLM from Yale Law School in 1993. He is a member of the Bar of the Republic of Korea and the New York State Bar. Jung Won Hyun Senior Foreign Attorney, Kim & Chang Seoul, South Korea T: +822 3703 1284 E: jwhyun@kimchang.com W: www.kimchang.com Jung Won Hyun s practice areas are the defence of antitrust investigations, merger notifications, M&A and other cross-border corporate transactions and insurance. Since joining the firm in 2000, she continues to be extensively involved in providing corporate and antitrust counselling to both foreign and domestic firms in Korea. Before her practice in Korea, Hyun was an associate in the business department at the New York office of Morrison & Foerster from 1997 to 2000. Her representations in that period included various venture capital transactions and M&A transactions. Hyun studied in the mass communications department at Seoul National University for two years before continuing in her education at Columbia College, where she received a BA in 1993. She graduated from the School of Law at Columbia University in 1997, where she served as a note editor in the Asian Law Journal. She is admitted to the New York bar and speaks Korean, English and Japanese. 68 IFLR SURVEY MERGER CONTROL 2014