MOFCOM unveils rules on concentrations of business operators

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MOFCOM

On 29 August, the Ministry of Commerce (MOFCOM) published the Assessment of the Impact on Competition of Concentrations of Business Operators Interim Provisions, which govern the competition impact assessment that forms part of the anti-monopoly review of a concentration of business operators, and guide business operators to improve the reporting of any such concentration. The Interim Provisions, which took effect on 5 September, are based on the PRC Anti-Monopoly Law, the Reporting of Concentrations of Business Operators Measures and the Review of Concentrations of Business Operators Measures.

Factors to be considered in the review of a concentration of business operators. Various factors that will affect market competition are to be considered based on the specific circumstances of each case. These factors include the business operator’s market share in the underlying market and its control over that market; the degree of market concentration in the underlying market; the impact of the concentration on market access and technological progress; the impact of the concentration on consumers and other underlying business operators; and the impact of the concentration on national economic development.

Market share and market concentration. The Interim Provisions clarify the role that analysis of market share and market concentration should play in the evaluation of the impact on competition of a concentration of business operators. Market share is to be determined based on the structure of an underlying market and the status of business operators and their competitors in that market. Usually, the higher the levels of concentration in an underlying market, the greater the effect of any further concentration and the greater the possibility that any such concentration may eliminate or restrict competition.

Other factors to be considered. The Interim Provisions specify that in assessing a concentration of business operators, other factors to be considered include the impact of the concentration on the public interest and economic efficiency; whether the business operators involved in the concentration are at risk of imminent bankruptcy; and whether there is any countervailing purchaser power.

Criteria for prohibiting a concentration. According to the Interim Provisions, if a concentration of business operators has or may have the effect of eliminating or restricting competition, MOFCOM should prohibit it. However, if the business operators can prove that on balance the concentration promotes rather than lessens competition, or that the concentration is in the public interest, MOFCOM may decide not to prohibit it. MOFCOM may approve a concentration but impose conditions aimed at minimizing the adverse impact of the concentration on competition.

Business Law Digest is compiled with the assistance of Haiwen & Partners. The authors can be emailed at baochen@haiwen-law.com. Readers should not act on this information without seeking professional legal advice.

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