On 11 September 2023 the State Administration for Market Regulation published the Merger Control Antitrust Compliance Guide (Guo Shi Jian Fan Zhi Er Fa [2023] No. 74), signed on 5 September. The guide creates no new notification obligation. It turns the judgments most often misread under the Anti-Monopoly Law and the notification rules into an operational compliance method.
For companies pursuing acquisitions, minority stakes and joint ventures, the most useful part is three judgments: whether a transaction constitutes a concentration, whether it reaches the notification threshold, and when notification is due.
What constitutes a concentration
The guide follows the statutory framework and treats mergers, acquisition of control and establishment of joint ventures as concentrations. In practice the difficult cases are not mergers but minority investments and contractual arrangements.
Control is not determined by shareholding alone. Board seats, voting mechanisms, veto rights, operational management or contractual arrangements may all confer control. A low shareholding with a veto over major matters, often described as negative control, still requires assessment.
Thresholds and turnover
Whether the threshold is met depends on the turnover of the undertakings concerned, not the transaction value. Turnover calculation requires consolidating affiliated companies and assessing relevance by industry and business line.
Three errors are common: looking only at the target’s turnover and ignoring the acquirer and affiliates; looking only at domestic turnover and ignoring the global aggregate; and separating funds, concert parties or companies under common control. The guide expects the calculation to be completed at the structuring stage, not after signing.
Timing and consequences
A concentration must be notified before implementation, and may not be implemented before clearance. Implementation includes completing the equity transfer, obtaining control or participating in management.
Failure to notify carries more than a fine. The authority may order the implementation to be stopped, shares or assets to be disposed of within a time limit, the pre-transaction state to be restored, and may impose a fine. For both parties, this means the closing timetable, breach provisions and exit arrangements must account for antitrust review.
Compliance organisation and key risks
The guide encourages companies to establish a merger control compliance system with a responsible department, review process, training and document management. Companies that invest and acquire frequently should embed antitrust review into investment decisions.
Key risks include successive acquisitions that should be aggregated, control arrangements in joint ventures, contractual control and variable interest structures, jurisdiction over cross-border transactions, and antitrust approval conditions in transaction documents.
Four clauses in transaction documents
First, notification obligation and allocation. Identify who files, what is submitted and how follow-up questions are handled.
Second, approval as a closing condition. Make antitrust clearance a condition precedent and provide for failure to obtain it.
Third, interim conduct restrictions. No substantive integration or sharing of sensitive information before closing.
Fourth, break fees and time cost. Approval timing is uncertain, and the documents should address a prolonged review.
For M&A and exit arrangements, see M&A and exit; for transaction structuring and financing, see financing and equity; for long-term compliance systems, see annual legal counsel.
This note is based on the Merger Control Antitrust Compliance Guide published by the State Administration for Market Regulation on 11 September 2023. It is for reference only and does not constitute legal advice.