On 26 January 2024, the State Council of China released its long-awaited and increased turnover thresholds for mandatory merger notifications in the Provisions of the State Council on Thresholds for the Notification of Concentrations of Undertakings (“2024 Thresholds”). The effect is expected to be a marked decrease in the amount of transactions to be filed with the Chinese merger control authority, the State Administration for Market Regulation (“SAMR”). The 2024 Thresholds became immediately effective.
The 2024 Thresholds are supplemented by SAMR’s Guidance Handbook for Anti-Monopoly Notification of Concentration of Undertakings (“Handbook”)[1], which clarifies certain legal and practical issues associated with the merger control filing process in China.
This note summarises the key takeaways from the 2024 Thresholds and the Handbook.
Updated and increased turnover thresholds
The two sets of turnover thresholds have been increased: parties now need to generate more turnover, both domestically in / into China and globally, in order to trigger a filing. Under the 2024 Thresholds, SAMR predicts that filings would fall away in approximately over 30% cases.[2]
The below table illustrates the differences between the previous thresholds and the 2024 Thresholds.
| Turnover Thresholds | Previous Thresholds (in RMB) | 2024 Thresholds (new) (in RMB) | |
| 1(a) | Parties’ combined global turnover; AND | Exceeds 10 billion (approx. US$1.54 billion) | Exceeds 12 billion (approx. US$1.73 billion) |
| 1(b) | At least 2 undertakings’ respective China-wide turnover | Exceeds 400 million (approx. US$61.9 million) | Exceeds 800 million (approx. US$115.06 million) |
| OR | |||
| 2(a) | Combined China-wide turnover; AND | Exceeds 2 billion (approx. US$309.8 million) | Exceeds 4 billion (approx. US$0.58 billion) |
| 2(b) | At least 2 undertakings’ respective China-wide turnover | Exceeds 400 million (approx. US$61.9 million | Exceeds 800 million (approx. US$115.06 million) |
Transactions which fall below the 2024 Thresholds
In circumstances where the above thresholds are not met, SAMR has confirmed its power to require parties to make a notification, provided there is evidence showing that the proposed transaction will have “an actual or potential effect of excluding or restricting competition”.
Unfortunately, what constitutes “an actual or potential effect of excluding or restricting competition” is not further elaborated in either the 2024 Thresholds or the Handbook. However, insights can be drawn from guidelines with similar wording.[3] The guidelines suggest that this power could be invoked in transactions involving: (i) a nascent or emerging company; (ii) complimentary or low-pricing services; or (iii) highly concentrated markets or markets with a limited number of competitors.
It is reported that SAMR will formulate more formal guidelines to demonstrate how it will exercise its discretion in handling cases which fall below the 2024 Thresholds[4].
Transitionary period
For certain transactions already under review at the time the 2024 Thresholds took effect, but which do not satisfy these new thresholds, it is reported that there is a special mechanism whereby SAMR will issue clearance without further review.
However, if parties have specifically listed Chinese merger control clearance as a condition precedent, it is crucial for parties to engage SAMR before waiving, renegotiating, or maintaining the condition precedent and related clauses (e.g. clauses relating to level of efforts required from parties, cooperation, remedies, termination and long stop date).
How to assess the China-wide turnover for the purpose of a filing
In both sets of thresholds, each of 2 parties must have at least RMB 800 million China-wide turnover. The Handbook has re-emphasised that China-wide turnover refers to turnover generated by customers located within China. This includes imports by a party from other jurisdictions to China, but excludes products or services exported by a party from China to rest of world.
Who bears legal liability in case of a missed filing?
The Handbook further clarifies that if a filing is triggered, the parties which have the obligation to make such a filing are: (i) in the case of a merger, parties to the merger; or (ii) in cases other than a merger, parties obtaining control or having decisive influence.
If parties fail to file a notifiable transaction, these parties will bear legal responsibility, including the imposition of monetary penalties.
SAMR’s enforcement trend and future approach
While China has increased its merger control threhsolds, this does not mean that its attention towards merger control has dwindled. Enforcement relating to failure to file was prominent on SAMR’s agenda in 2023, and administrative penalties were imposed in 32 cases[5]. Such active enforcement is expected to continue.
Given SAMR’s active enforcement in this area, parties should not be deterred to make a filing in China if the 2024 Thresholds are met. This is because on average, SAMR’s review period is relatively short. In 2023, the review period lasted for 25.7 days, and in case of simplified procedure, the average review period was only 17.7 days.
Summary of key takeaways
The significantly higher merger control thresholds are welcomed, and will likely decrease the number of filings required (797 were closed in 2023). The projected reduced caseload should enable SAMR to review notified cases more efficiently, thereby providing smoother and faster clearances to parties.
[1] 经营者集中反垄断申报指导手册.
[2] https://www.samr.gov.cn/fldes/jyzjzsbxbz/art/2024/art_b604aa7075a845d5973b1a366686f4cb.html
[3] According to Article 19 of the Anti-Monopoly Guidelines on Platform Economy and Article 23 of the Anti-Monopoly Guidelines on Active Pharmaceutical Ingredients.
[4] https://www.samr.gov.cn/fldes/jyzjzsbxbz/art/2024/art_b604aa7075a845d5973b1a366686f4cb.html
