Chinese Merger Control Law is Fusion in its Approach

Chinese Merger Control Law is Fusion in its Approach


We often hear about how China's merger review "diverges" from other jurisdictions, most recently in reaction to conditional approvals of the Seagate/Samsung and Western Digital/Hitachi mergers. But China's MOFCOM is merely doing its homework. Similar to "fusion" cuisine, MOFCOM practices "fusion" merger control as it blends two aspects: its mandate under the Anti-Monopoly Law ("AML"), and the antitrust theories of other jurisdictions.

Unlike other jurisdictions, which are relatively independent of their respective governments, MOFCOM answers to the State Council. Under the AML, MOFCOM's mission has a political perspective to advance "healthy development of a socialist market" and it has the authority to formulate and implement regulations "suitable for the socialist market economy." Therefore, MOFCOM's mission will vary depending on the State Council's national economic policy: whether to move more to a capitalistic market-driven economy or remain as a socialist controlled economy.

From a purely theoretical perspective, the AML's standard of review is in line with other mature jurisdictions; however, as in the case of MOFCOM's mission, the standard of review has the added political element of considering the "socialist market". The standard of review is whether it is likely that the transaction will result in eliminating or restricting competition. Similar to the US and EU practice, the factors to consider include: market shares and ability to control the market, degree of market concentration, effects on market access and technological progress, and effects on consumers. But for MOFCOM there is also the additional political factor-the effect of concentration on the political development of the national economy.

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