30 January 2024 Fay Zhou  - Arthur Peng Competition and Antitrust

China Introduces New Merger Filing Thresholds

China’s new and higher merger filing thresholds have been announced and become effective recently, which are expected to affect transaction planning for dealmakers.

The new thresholds

A filing should be made to the State Administration for Market Regulation ("SAMR") prior to closing if, in the last financial year,

  • the combined turnover of all parties to the concentration is at least
    • globally, RMB 12 billion (c. EUR 1.57 billion / USD 1.72 billion (previously RMB 10 billion); OR
    • in China, RMB 4 billion (c. EUR 523 million / USD 573 million) (previously RMB 2 billion)

AND

  • the turnover in China of each of at least two of the parties to the concentration is at least RMB 800 million (c. EUR 104 million / USD 115 million) (previously RMB 400 million).

One main change compared to the consultation draft made available in 2022 is the removal of the proposed brand new test aiming to capture “killer acquisitions” by mega firms (with PRC turnover of over RMB 100 billion). As a result, the new thresholds remain purely turnover-based and less complicated to assess.

Residual jurisdiction

It is note-worthy that SAMR may “call in” deals which fall below the above new thresholds but would have an anti-competitive effect in China, which means residual uncertainty for deal planning. There is currently a lack of detailed guidance as regards the specific circumstances under which SAMR would exercise such power, while SAMR is understood to be developing an implementing regulation to shed more light on the call-in procedure.

Scope of application

The new thresholds will apply to transactions which have not been signed as of today. While it is not entirely clear, the current practice suggests that the new thresholds would also apply to transactions which were signed some time before but have not been cleared by SAMR (if the transaction was notified to SAMR under the old thresholds) or closed.