By Andrew Foster & Julia Zhu (Skadden Arps Slate Meagher & Flom LLP)
For the first time since China’s Anti-Monopoly Law (AML) came into force in 2008, the government is proposing major changes to its centerpiece antitrust legislation. On January 2, 2020, the State Administration for Market Regulation (SAMR) published a draft amended Anti-Monopoly Law for public comments (Draft AML). The key changes in the Draft AML include proposals to:
- dramatically increase fines, especially for (i) failures to notify mergers, acquisitions and joint ventures, (ii) gun-jumping, and (iii) breach of merger conditions; and
- introduce mechanisms to stop the review clock during merger control assessments by SAMR.
The Draft AML would also articulate a more precise definition of “control” for evaluating notifiability of potential transactions, and add an indispensability requirement for the use of efficiency defenses. The Draft AML is still subject to consultation and further review by China’s administrative and legislative bodies. While there is no fixed timetable for formal adoption, the Draft AML could be passed by the National People’s Congress as early as 2021 if the remaining process runs smoothly.
Significant Increases on Maximum Fines for Antitrust Violations, Particularly Failures To Notify Qualifying Mergers, Acquisitions and Joint Ventures
In its 11 years of antitrust enforcement, China’s agencies have collectively imposed fines of only RMB 12 billion (approximately USD 1.7 billion), lagging far behind penalties levied by peer agencies and regulators in the U.S. and Europe. One of the most criticized provisions of the current AML (at least domestically in China) has been the very low statutory maximums for monetary penalties, especially for failures to file mergers, acquisitions and joint ventures that meet the notification thresholds for mandatory SAMR review. The Draft AML proposes to significantly increase the level of fines for such failures to file. It would also raise the statutory maximums for other conduct-related behavior.
