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MOFCOM Held Special Press Conference on “Anti-monopoly Work Progress in 2012”
On December 27, the Ministry of Commerce held a special press conference on “anti-dumping work progress in 2012”. Shang Ming, the Director-general of the Anti-monopoly Bureau of the Ministry of Commerce and Director of the Office of the Anti-monopoly Commission of the State Council attended the press conference and took reporters’ questions. Conference minutes are as follows:
Host: Good morning, everybody! Welcome to today’s press conference. Today we have the Director-general of the Anti-monopoly Bureau of the Ministry of Commerce and Director of the Office of the Anti-monopoly Commission of the State Council Mr. Shang Ming here to brief you on the progress of legislation and enforcement work concerning anti-monopoly review on concentration of undertakings and take your questions. Now, please welcome Mr. Shang to give us a brief introduction.
Shang Ming: Good morning, friends from the press and media! The Anti-monopoly Law of the People's Republic of China (hereinafter referred to as the Anti-monopoly Law) was formally implemented in August 2008, and the Anti-monopoly Bureau was also established in 2008. The Ministry of Commerce conducts anti-monopoly review on concentration of undertakings in accordance with the Anti-monopoly Law, under which three kinds of acts are illegal: the first is business collusion, i.e., monopoly agreement of which you may have no knowledge; the second is enterprises' abuse of market dominant position; the third is enterprises’ expansion of their ability to control the market through mergers, so as to affect the market competition, which, legally speaking, is referred to as concentration of undertakings, and is commonly known as mergers and acquisitions of enterprises.

Since its formal implementation in 2008, the Anti-monopoly Law has been in force for more than four years. From 2009, I have been briefing you, through press conference at the end of each year or at the anniversary in August, on the progress of anti-monopoly work of the Ministry of Commerce over the past year, from which I hope you can obtain a general understanding of China’s anti-monopoly law, especially anti-monopoly review on concentration of undertakings. Objectively speaking, China’s culture of competition law has been relatively weak for a long time, and a lot of enterprises and individuals do not know much about the competition law. The Anti-monopoly Law is part of the competition law, and we hope to give an overall introduction of our work to friends from the media through the press conference held each year, and to further popularize the culture of competition through this way.
I would like to take this opportunity to introduce from the following four aspects this morning: first, supporting legislation of concentration of undertakings; second, enforcement of concentration of undertakings; third, international cooperation conducted by the Ministry of Commerce in the field of anti-monopoly; fourth, publicity and training carried out by the Ministry of Commerce. My briefing will take about half an hour, and then I would like to take your questions.
(I) Supporting Legislation of Concentration of Undertakings
As some of you may know that, compared with other laws, China’s anti-monopoly law is relatively simple which consists of only over fifty articles or so, and therefore, certain supporting regulations are required to well implement the law. Since 2008, the Ministry of Commerce has been working on the supporting legislation of anti-monopoly law. In the field of anti-monopoly, supporting legislation is divided into the following levels: first, administrative regulations formulated by the State Council, which are generally drafted by the Legislative Affairs Office of the State Council and promulgated in the form of regulation; second, those ones equivalent to quasi-regulations, which are guidelines issued by the Anti-monopoly Commission of the State Council; third, departmental rules and regulations issued by the three law enforcement agencies respectively. From 2008 to 2011, the administrative regulations of the State Council promulgated by us, guidelines formulated by the Anti-monopoly Commission and rules and regulations concerning concentration of undertakings issued by the Ministry of Commerce are eight in total.

In 2012, we made further efforts for the supporting legislation mainly from two aspects: the first is the provision on restrictive conditions for concentration of undertakings. In fact, before such provision is made, the Ministry of Commerce ever promulgated the Interim Provisions on the Divestiture of Assets or Business in the Concentration of Business Operators (hereinafter referred to as the Interim Provisions) in 2010. In order to summarize the experience in the implementation of the Interim Provisions and solve the problems found, the Ministry of Commerce decided to re-enact a new regulation to standardize the proposal, evaluation, implementation, supervision and change of restrictive conditions attached to concentration of undertakings as well as matters concerning legal liability in an all-around way. In accordance with the Anti-monopoly Law, there may be three consequences of review on concentration of undertakings: the first is prohibition, and the second is non-prohibition, including unconditional approval and approval with additional restrictive conditions. Seen from law-enforcing practices, in case problems are found by the Ministry of Commerce, a decision of approval with additional restrictive conditions is mostly adopted, and only in very few cases when no satisfactory solutions are put forward by the declaring party, the Ministry of Commerce has to make a decision of prohibition. Approval with additional restrictive conditions is equal to a commitment made by the operator to the Ministry of Commerce by putting forward with solutions to the competitive problems found in transactions upon review. We then turn the commitment made by the declaring party for the competitive problem into a restriction imposed by us on their transaction behaviors as well as a mandatory condition, which is the restrictive condition specified by law. New regulations are being formulated with the purpose of solving all kinds of problems that may be encountered throughout the process from the proposal, negotiation, evaluation and determination of such restrictive conditions to the implementation of supervision.

The second legislation project of 2012 is the Provisions on the Summary Procedure Applicable for Concentration of Undertakings Cases. Practices show that if the summary procedure is not applied, all the cases shall be handled according to the same standard procedure. Due to limited administrative law enforcement resources, major anti-monopoly law enforcement agencies worldwide, including those of the USA and the EU, all adopt the summary procedure to handle those cases that will not cause obvious adverse effects to the market competition. In this way, law enforcement effectiveness can be significantly improved, and law enforcement agencies are able to concentrate on handling those major and complex cases. If some of you were here last year, then you already know the basic situations of the past three years. Since the implementation of the anti-monopoly law in 2008, the number of cases concluded each year showed a growth trend. There were 16 cases concluded in 2008, 78 in 2009, 109 in 2010 and 171 in 2011. Seen from the current situation of this year, the number of cases concluded this year is basically the same with last year. In the case that the number of our personnel handling cases does not increase, the efficiency problem of case handling is obviously needed to be solved.
(II) Examination of Concentration of Undertakings Cases
1. Overview of Cases
As at December 26, 2012, the Ministry of Commerce received 201 cases of concentration of undertakings declaration, placed 186 cases on file, and settled 154 ones in total this year, including 6 ones approved conditionally, 6 ones withdrawn after case-filing and the remaining 142 ones approved unconditionally, which accounts for about 92% of all settled cases.

2. General Characteristics of Cases
In 2011, there were 205 cases of concentration of undertakings declaration, 185 ones were placed on file and 171 ones were settled. Up to now this year, 201 cases were declared, 186 ones were placed on file and 154 ones were settled. Therefore, these numbers this year are basically equivalent to those of last year. According to such a trend, the number of cases may stably remain at about 200 in 2013 and 2014. In 2012, 154 cases were settled, slightly less than those of the same period of last year. However, there are several days before the end of this year. We are settling some cases, so the number of finally settled cases is estimated to be almost equivalent to that of last year.

According to existing known data, we have analyzed the mode and nature of concentration of cases and industries relating to cases. However, the data used in the analysis are as at the end of this November.

Firstly, in terms of the mode of concentration of cases, the majority of cases fall into the category of equity acquisition. In 2011, 101 cases concerned equity acquisition, accounting for 62% of settled cases; 49 ones concerned the establishment of joint ventures, accounting for 30%. As of the end of November 2012, 71 cases concerned equity acquisition, accounting for 55%; 46 ones concerned the establishment of joint ventures, accounting for 36%. In view of these data, the percentage of cases relating to equity acquisition was not high, slightly decreasing as compared with last year.

Secondly, in terms of the nature of concentration of cases, most cases were of horizontal concentration. With regard to most cases, transaction parties have competitive relation. In 2011, 97 cases were of horizontal concentration, accounting for 60%; 13 ones were of vertical concentration, accounting for 8%; 42 ones were of compound concentration, accounting for 26%. As at November 2012, 80 cases were of horizontal concentration, accounting for 65% (about two thirds).

Thirdly, in terms of involved industries, most cases concerned manufacturing industries, which included petroleum, chemical engineering, mechanical manufacturing, automobile, ship, aircraft and mining industries. In 2011, 107 cases concerned manufacturing industries, and 13 ones concerned IT industry, and 12 ones concerned wholesale and retail. In 2012, 74 cases concerned manufacturing industries. As such, the cases concerning manufacturing industries slightly decreased as compared with that of last year, while other cases concerning retail, IT and service industries increased a little.

3. Cases Approved Conditionally
Following are several key cases this year to be illustrated: In 2012, the Ministry of Commerce approved 6 cases of concentration of undertakings with restrictive conditions.

The approval with restrictive conditions is described above just now. In 2012, the Ministry of Commerce conditionally approved 6 cases, which hits a record high since the implementation of the Anti-monopoly Law in 2008. From 2008 to 2012, the numbers of such cases were respectively 1, 5, 1, 4 and 6. It is not sure whether there will be any other cases approved conditionally or not by the end of this year, but 6 cases are already the most in one year. Several major cases are simply described below.

First, Western Digital acquired Hitachi Data Systems, which is an acquisition in hard disk field. Friends from media industry have inevitably contacted this field. As you know, China is the largest hard disk user in the world, and thereby the case had a significant influence on us. Although China is the largest manufacturer of computers and user of hard disks, China does not produce hard disks. The top five hard disk manufacturers worldwide are all foreign enterprises. Before 2012, 2 of these manufacturers have been merged, reducing the number of giant manufacturers to 4. If the acquisition of Hitachi Data Systems by Western Digital is approved this year, the number of disk manufacturers will decrease from 4 to 3. Decreasing from 5 to 3 in number will result in a high oligopoly market structure, which attracted extensive attention of all walks of life in China, the largest hard disk user. Upon review, the Ministry of Commerce deemed that this transaction would have the influence of excluding and restricting competition, so this transaction was approved with restrictive conditions. Additional conditions include: firstly, hard disk businesses of the acquirer and the acquiree remain independent in aspect of legal status and sales relations after acquisition. Therefore, it is just nominal merger for Hitachi Data Systems and Western Digital still sell hard disks in an independent capacity. They are still competitors, and cannot exchange competition information or collude. Secondly, the acquirer and the acquiree reasonably determine output and production capacity according to market demand. Thirdly, the acquirer and the acquiree cannot compel customers to exclusively purchase their hard disks. Fourthly, the acquirer and the acquiree continually invest R&D capital in innovation field. It is all known that one of the most negative influences of monopoly is innovation suppression, which is the original intention of the issuance of the Anti-monopoly Law. Therefore, they are required to continually invest R&D capital in innovation field. Fifthly, Western Digital stripped the 3.5-inch hard disk businesses of Viviti company under Hitachi Data Systems to a third party.

Second, Google acquired Motorola. This is a noticeable case, which is investigated by the USA, other countries and China. Some significant transnational mergers and acquisitions usually cannot finish until they have passed the investigation by law enforcement agencies of several countries. Case-filling of this case occurred in November 2011 and this case was closed in May 2012, which was a long time span due to its complicated details. According to the acquisition agreement concluded by and between Google and Motorola, Google would acquire all shares of Motorola and Motorola would become a wholly-owned subsidiary of Google after acquisition. The core of this case was that Google would control the Motorola’s competition in smartphone market by virtue of its edges in operation system market. As all of you know, Android system, an intelligent application platform developed by Google, has been extensively applied on smartphones and tablet PCs. Before acquisition, Google allowed open sources and free use of Android at all times in China, which has become the largest Android application market all over the world. In 2012, two in three phones sold in China were installed with Android operation system. Just in the fourth quarter of 2011, the sales volume of smartphones in China reached 22,830,000. The holding volume of smartphones in China is over 200,000,000. In terms of mainstream operation systems used in Chinese smartphone market, Symbian, Apple and Android respectively account for 32%, 11% and 47.3% (close to 50%). Calculated by this percentage, nearly 100,000,000 telephone users are using Android system with free open sources.
That whether Android would be designed with closed sources and be charged after such a noticeable acquisition was the biggest concern of stakeholders. After fully evaluating relevant market of this transaction, free open sources of Android, fair treatment of other smartphone manufacturers by Google, patent license of Motorola Mobility, influence on market competition and other issues, the Ministry of Commerce ultimately considered that this concentration would exclude and restrain completion. Therefore, the Ministry of Commerce approved this transaction conditionally, requiring the transaction parties to fulfil the following obligations within 5 years after concentration: firstly, Google continues to provide free open sources. Five years is a long time for smartphone market, during which IT field may experience tremendous changes. It is a strong constraint. As you all know, Samsung Mobile Phones develops vigorously now. Secondly, in aspect of Android platform, Google should treat all original equipment manufacturers in a non-discriminative way and cannot give favoured treatment to the acquired Motorola. Thirdly, Google should continue to fulfil the obligations of Motorola Mobility to maintain fairness, reasonability and non-discrimination in aspect of its patents. By virtue of the aforesaid conditions, the Ministry of Commerce has minimized the negative influence of this transaction on competition in the industry, maintaining fair competition in the market.

Third, Walmart acquired Niuhai. This case was investigated for 6 month with case-filling in this February and conclusion in this August. According to the Anti-monopoly Law, the longest investigation period is 6 months. Upon investigation, the Ministry of Commerce found that Walmart acquired Niuhai, which acquired No. 1 Store of Shanghai Yishiduo. I don’t know whether you shop online or not. No. 1 Store is the largest internet supermarket in China, while Walmart is the physical supermarket magnate in the world. What problem will be incurred by the acquisition of the largest internet supermarket in China by a physical supermarket magnate? The Ministry of Commerce investigated this case. Upon investigation, the Ministry of Commerce found Walmart has competitive edges among physical retailers in China, for it has not only mature storage and distribution systems but also extensive goods supply channels and high brand recognition. After transaction, these edges may be transmitted to the acquired internet supermarket, generating transmission effects. Investigation results also indicate that the entity after acquisition may develop value-added telecom businesses via No. 1 Store of Yishiduo, exerting excluding and restricting influences on value-added telecom business market. Value-added market is divided into two sectors: firstly, self-operated businesses, namely selling one's own products on the internet, e.g. internet supermarket; secondly, operating a third party’s businesses. Competition problems may arise from these two sectors. Therefore, we are concerned over the negative influence of this concentration on value-added telecom market. In light of that, the Ministry of Commerce approved this transaction with the following conditions: firstly, the acquiree is limited to the part of goods sales via its own network platform. No. 1 Store originally engaged in two sectors of businesses, but the acquired businesses should be only self-operated ones. Secondly, without permit of value-added telecom businesses, Niuhai shall not engage in value-added telecom businesses after acquisition. Thirdly, after this transaction, Walmart shall not evade restrictions under relevant domestic laws via VIE framework to directly conduct value-added telecom businesses. After approval of this case, the Ministry of Commerce has been supervising the implementation of these additional conditions. If the transaction party conducted value-added telecom businesses after acquisition, the current situation may be different. Additionally, the Ministry of Commerce approved three other cases with conditions, which are not described here out of consideration for time. For details, please visit our website to learn about the decision announcements of these cases.

4. Case Information Publication
Since the implementation of the Anti-monopoly Law in 2008, the Ministry of Commerce has been attaching importance to information publication, and we are also required to do so by the leaders of the Ministry of Commerce. According to the Anti-monopoly Law, the Ministry of Commerce should publish to the society the investigation decisions of conditional approval and prohibition. Investigation decision is published through the issuance of case announcement. However, as to the decision of unconditional approval, the Anti-monopoly Law does not specify whether or not to publish relevant information. We used to inform the declarant that upon investigation, we have no objection to and approve its declaration.

With a view of enhancing the transparency of law enforcement and carrying out government information publication well, we also referred to the practice of some foreign law enforcement agencies. The Ministry of Commerce once published all cases approved unconditionally totalling 458 from August 2008 to September 30, 2012, on the website of the Anti-monopoly Bureau. The disclosed information included the title of cases and operators involved in concentration. According to such information, we may know basic information like the merger between which enterprises, the joint venture established by which enterprises, as well as the shares or assets of which enterprise bought by which enterprise. After this one-time publication, we will publish the summary of relevant information quarterly. At present, the published information is limited to the title of cases and operators involved in concentration. We are researching whether to publish other information in future.

5. Investigation on and Handling of Concentration of Undertakings not Declared Legally

You may have noted that we promulgated new ministerial rules, the Interim Measures for Investigating and Handling Concentration of Undertakings not Declared Legally, on February 1, 2012. Up to now, we have received 3 reports, 2 of which have been verified. Since the transaction has not been implemented yet, we urge the enterprises concerned to declare the concentration the soonest possible. We are checking the report materials of the remaining 1 report. Additionally, during discussion, we found another 1 case has not been declared legally, which is being filed and investigated now.

To be frank, I think competition culture is relatively weak in China. In addition to the late implementation of the Anti-monopoly Law in China, some enterprises indeed do not know whether it is necessary to make anti-monopoly declaration for their transactions or not. To solve this problem, we promulgated the Interim Measures for Investigating and Handling Concentration of Undertakings not Declared Legally this year. According to these Measures, as to corporate merger and acquisition reaching declaration threshold, we should tell and warn relevant enterprises to make a declaration, or they will bear corresponding legal liability.
(III) International Exchange and Cooperation
Along with economic globalization and worldwide capital flow, many mergers and acquisitions are transnational, and therefore, anti-monopoly law enforcement agencies of different countries are necessary to conduct international exchange and cooperation. The Ministry of Commerce has been attaching great importance to exchange and cooperation with anti-monopoly law enforcement agencies of other countries and relevant international organizations. Through exchange and cooperation and learning foreign anti-monopoly legislation and law enforcement experience, the Ministry of Commerce may keep improving and enhancing its own law enforcement capacity in a bid to better maintain fair market competition order, promote economic recovery and protect the legal rights and interests of consumers. On June 25, 2012, the Ministry of Commerce, together with representatives from other 2 law enforcement agencies of China, had a Sino-Europe competition policy dialogue with the Directorate-General for Competition of European Commission. This dialogue was the eighth one. Gao Hucheng, international trade negotiation representative and deputy minister of the Ministry of Commerce, and the director of the Directorate-General for Competition of European Commission attended the dialogue, and exchanged opinions on latest legislation and law enforcement situations. Both sides recognized the cooperation in competition field and achievements from the establishment of Sino-European competition dialogue mechanism since 2004, and hoped to continue the dialogue in future.

On September 25, 2012, Sino-US anti-monopoly dialogue was held in Washington. The USA terms anti-monopoly antitrust. In terms of China, Gao Hucheng, international trade negotiation representative and deputy minister of the Ministry of Commerce, led a team to attend the dialogue. The National Development and Reform Commission and State Administration for Industry & Commerce also assigned representatives to be present. As to the USA, the Federal Trade Commission and Department of Justice assigned representatives to participate. Last year, China and the USA signed a memo. This dialogue was the first one between senior executives after the signing of the memo by the two parties, which marked a new phase of the cooperation between anti-monopoly law enforcement agencies of China and the USA. Actually, in addition to such a dialogue between senior executives, the two countries also have work and technologies exchanges and case cooperation. Along with continually deepening exchanges and cooperation between us and the anti-monopoly law enforcement agencies of the EU and the USA, we also tried to exchange information about joint investigation on major transnational merger and acquisition cases on the premise of compliance with laws and confidentiality provisions. Such information exchanges are helpful for us to more efficiently supervise transnational merger and acquisition and conduct beneficial discussions on some technical issues. As case cooperation and information exchanges involved confidential information, all countries were quite cautious about technical cooperation, which was conducted only on the premise of compliance with relevant laws and confidentiality provisions.

Besides cooperation with the Europe and the USA, the Ministry of Commerce also established cooperation mechanisms with law enforcement agencies of other countries, including Sino-UK memo of understanding on anti-monopoly cooperation and Sino-South Korea memo of understanding on anti-monopoly cooperation. International exchanges and cooperation I just mentioned include two modes: joint cooperation between three law enforcement agencies of China and foreign ones, and respective cooperation between three law enforcement agencies of China and foreign ones. The above Sino-UK memo of understanding on anti-monopoly cooperation and Sino-South Korea memo of understanding on anti-monopoly cooperation are of the latter. The Ministry of Commerce, National Development and Reform Commission and State Administration for Industry & Commerce respectively signed similar cooperation agreements with relevant countries. Through such cooperation and exchanges, mutual understanding and trust have been strengthened, and the specific mode of establishing bilateral cooperation mechanisms was discussed. In addition, the Ministry of Commerce also attended the multilateral competition expert group meeting organized by the United Nations Conference on Trade and Development, and multilateral international anti-monopoly meetings organized by the Asia-Pacific Economic Cooperation and the Organization for Economic Cooperation. These meetings were helpful for us to learn about latest foreign anti-monopoly trends and introduce the latest progress of China’s anti-monopoly work.
(IV) Publicity and Training of the Anti-monopoly Law
Since China’s Anti-monopoly Law is new and China’s competition culture is weak, we have been making every effort to publicize the Anti-monopoly Law in over 4 years after its implementation. The Ministry of Commerce organizes a series of campaigns every year to publicize the Anti-monopoly Law in several ways in order to raise enterprises’ and social public’s sense of the Anti-monopoly Law, and to deepen their understanding of the law and competition culture. In 2012, the Ministry of Commerce organized 3 training sessions relating to the Anti-monopoly Law towards staff from local competent business authorities and business associations, training more than 300 persons. From 2008 up to now, an accumulative number of 16 training sessions have been organized, training more than 1,500 persons in total. Such a training extensively covered nationwide business systems. In order to enhance effects, each session was targeted, and lecture contents and teaching methods were properly adjusted according to different conditions of law enforcement. In the meantime, we also organized local competent business authorities and business personnel to receive training on competition law overseas.

In general, the publicity and training of the Anti-monopoly Law will be still our priority in some time going forward. We published the Anti-monopoly Reader this year, and relevant cartoon posters and pamphlets before, all of which were intended to help you learn about the knowledge of the Anti-monopoly Law as much as possible in various ways. For example, I summarized concentration of undertakings as merger and acquisition above. It is easy for you to understand. Besides, the Anti-monopoly Law also regulates collusion agreement entered into by and between enterprises and enterprises’ abuse of market dominant position. It should be noted that some corporate behaviors are restrained by the Law Against Improper Competition. Now the monopoly easily called by people on the internet is not really the one regulated by the Anti-monopoly Law. Correct understanding of the Anti-monopoly Law needs the publicity and popularization toward the whole society, to which media peers may contribute more. Besides special meetings, you may usually learn relevant information from us through the News Office of the Ministry of Commerce. That’s all.

Host: You may raise your questions now and please tell us your media name before asking.
Reporter from CBN: The draft of provisions on additional restrictive conditions in supporting legislation of concentration of undertakings just mentioned has been finished. Would you please tell us which provisions will be added? When will the provisions be promulgated?

Shang Ming: According to the work division of the Ministry of Commerce, the Anti-monopoly Bureau is just responsible for drafting and will finally submit the draft to the legislation department to fulfil deliberation procedures. At present drafting work is coming to an end, and we are going to submit the draft to the legislation department under the Ministry of Commerce. After receiving the draft, the legislation department will fulfill relevant procedures and seek relevant social opinions. I personally forecast that it is quite probable to promulgate the provisions in 2013. The provisions are complicated and the title is a mouthful. We will publish the draft on the website at proper time. If you are interested, you may visit the website then.
Reporter from CCTV: First, my questions are about ongoing interim provisions on review of the Summary Procedure Applicable for Concentration of Undertakings Cases. Why is the summary procedure more time-saving than the current review procedures? What cases is the summary procedure applicable to? What advantages does the summary procedure have? Second, what are cases not declared?

Shang Ming: I’d like to answer your second question first. Not all concentrations of undertakings but the concentration meeting standards should be declared. Declaration standards include: First, one enterprise may control another enterprise via concentration, obtaining the right of control over another enterprise. But what is control? This is a difficult point. The Anti-monopoly Law specifies that an enterprise holding over 51% voting rights of another enterprise absolutely means that the former controls the later. However, there are some cases when control is relative. For example, when an enterprise holds less than 51% equity rights of another enterprise, or when an enterprise buys 20% shares of another enterprise. On the one hand, we hope the NPC or the Legislative Affairs Office of the State Council can make specific provisions on control during their law enforcement. As a law enforcement unit, we understand control broadly. An enterprise acquires another enterprise or two enterprises establish a joint venture, both will result in an operator having certain impact on another operator. On the premise of meeting the above condition, we will investigate only if any enterprise conducts a declaration. We have no ground to deem that this situation is not within the review range of concentration of undertakings. Anyhow, the premise of control transfer should be met. Secondly, the concentration generating control must meet a certain scale and amount standard, namely the so-called declaration thresholds. The thresholds include: total turnover worldwide of RMB10,000,000,000 at least, or total turnover in China of RMB2,000,000,000 at least; total turnover in China of at least two enterprises of RMB400,000,000 at least, which should be met in the meantime. As you all note, transaction parties in the acquisitions including conditional ones mentioned above are mostly two wholly foreign enterprises. Why should the acquisitions be declared in China? The reason is that the transaction is inevitably related to Chinese market and the turnover in China of the enterprises is not less than RMB400,000,000. Therefore, the above two conditions should be met; if not, it is unnecessary to declare any merger and acquisition generated. As mentioned above, some enterprises do not learn about competition culture and even do not know that the Anti-monopoly Law has been promulgated. There used to be no review and approval of anti-monopoly. Some enterprises do not know about that. Even if they know, they are not sure whether control transfer arises and whether the turnover of transaction parties reaches the specified threshold. Therefore, some enterprises may conduct declaration late, just as the special example mentioned above. We have issued special regulations on the merger and acquisition which are not declared. We are now strengthening monitoring through various channels.

Second, I will talk about the summary procedure. It has been over 100 years and over 50 years respectively for the USA and the EU to execute the anti-monopoly law. They did not apply the summary procedure at the very beginning, and through summarizing practical experience, they found that some cases might not incur substantial damage to market competition. Standards of judging such cases in all countries fall into two types: market concentration and market shares. Economists designed a formula, called HHI index, to calculate market concentration. For example, HHI index below 1,000 or 800 indicates that the concentration of market structure is quite low. The merger and acquisition in such a market are improbable to exert a negative competition influence, and review procedures should be simplified. Additionally, if market shares of enterprises after merger and acquisition are below 10% or like that, negative competition influence will usually not be generated either. If the declaration threshold is reached, the procedures applicable to such merger and acquisition will be simple. It is unnecessary to seek opinions broadly or collect so many declaration materials. As a result, review time will be cut down significantly to less than 30 or 20 days. If there is no summary procedure, all cases should go through common procedures to seek opinions broadly and compare a lot of materials, leading to a long review period. In that light, we summarized previous case handling experience. If the summary procedure is inapplicable, we will handle cases generally, which will take over 30 days to finish review. The law enforcement agencies of China and other countries were compared internationally. The majority of cases were settled by us in over 30 days, which exceeded the average of other regions and countries. Therefore, we hope to change this situation by the summary procedure. I once stated at the special press conference the year before last and last year that we would strive to raise the percentage of cases settled in the first phase. It’s regretful that we did not achieve this objective. I hope the summary procedure can help do it.
Reporter from Caijing Magazine: Could I understand your explanation in this way: Control is generated if equity and capital acquired exceed 50%. However, if equity and capital acquired are below 50% and dominant influence can be exerted, what will you do then? Isn’t there a specific quantification standard?

Shang Ming: Article 22 of the Anti-monopoly Law sets out “In any of the following circumstances, concentration of undertakings may not be declared with the enforcement agency of the Anti-monopoly Law under the State Council”. First, an operator involved in concentration holds over 50% shares with voting rights or assets of each of other operators, which means control originally. Additionally, “over 50% of operator's shares with voting rights or assets are controlled by another person”. Such a control relation specially refers to holding over 50% shares with voting rights or assets. If an operator originally holds 51% shares of another operator and buys the remaining 49% shares of the latter, it will be unnecessary to declare the acquisition. Is there a reversed deduction for holding below 51% shares with voting rights or assets? Concentration of undertakings is operators’ merger, under which one operator obtains the control over other operator or exerts decisive influence on other operator through acquiring equity or assets. What is control? What is decisive influence? I just mentioned that we hope these can be defined through legislation. The Ministry of Commerce does not have legislative power, and is not entitled to formulate or interpret relevant law. Therefore, we enforce the law according to our broad understanding. When some operator declares merger or acquisition, we cannot judge that this is out of our jurisdiction over concentration, which is beyond our power.
Host: Thank you, Mr. Shang, and thank you, all the reporters. This will be the end of today’s press conference.

Translated by Hu Xiaoying and Huang Lin

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