Merger Control2020 · South Africa Marianne Wagener & Julia Sham, Norton Rose Fulbright 180 Switzerland Michael Tschudin, Frank Scherrer & Urs Weber-Stecher, Wenger & Vieli Ltd. 195

Editor: Nigel Parr

Ninth Edition

Merger Control

2020

CONTENTS

Preface Nigel Parr, Ashurst LLP

General chapter COVID-19: Avoiding the failure of the failing firm defence

John Bruce & Mat Hughes, AlixPartners UK LLP 1

Country chapters

Austria Dr. Lukas Flener, Fellner Wratzfeld & Partner Rechtsanwälte GmbH 17

Belgium Hendrik Viaene, David Wouters & Karolien Van der Putten, Deloitte Legal – Lawyers 27

Brazil Leonardo Rocha e Silva, José Rubens Battazza Iasbech & Fernanda Ribeiro Vasconcelos Merlo, Pinheiro Neto Advogados 35

Canada Micah Wood, Kevin H. MacDonald & Chris Dickinson, Blake, Cassels & Graydon LLP 44

China Zhan Hao & Song Ying, AnJie Law Firm 57

Denmark Olaf Koktvedgaard, Søren Zinck & Frederik André Bork, Bruun & Hjejle Advokatpartnerselskab 66

France Bastien Thomas & François Aubin, Racine 73

Germany Dr. Christian Bürger & Miroslav Georgiev, GÖRG Partnerschaft von Rechtsanwälten mbB 87

Greece Efthymios Bourtzalas, MSB Associates 99

Israel Dr. David E. Tadmor & Shai Bakal, Tadmor Levy & Co. 109

Japan Tomoya Fujita & Hiromu Suemasa, Mori Hamada & Matsumoto 119

Korea Joohyoung Jang, Jisu Kim & Jihyun Youn, Barun Law LLC 128

Malaysia Janet Looi Lai Heng & Tan Shi Wen, Skrine 137

Netherlands Joost Houdijk & Robbert Jaspers, AKD Benelux Lawyers 148

Russia Anastasia Kayukova & Olga Gorokhova, ALRUD Law Firm 153

Singapore Daren Shiau, Elsa Chen & Scott Clements, Allen & Gledhill LLP 162

Slovakia Andrej Schwarz, SCHWARZ advokáti s.r.o. 174

South Africa Marianne Wagener & Julia Sham, Norton Rose Fulbright 180

Switzerland Michael Tschudin, Frank Scherrer & Urs Weber-Stecher, Wenger & Vieli Ltd. 195

Turkey Gönenç Gürkaynak & Öznur İnanılır, ELIG Gürkaynak Attorneys-at-Law 202

United Kingdom Ruchit Patel, Lisa Kaltenbrunner & Charlotte Brunsdon, Ropes & Gray LLP 209

USA Kara Kuritz, Matthew S. Wheatley & Brian N. Desmarais, Goodwin Procter LLP 222

GLI – Merger Control 2020, Ninth Edition 57 www.globallegalinsights.com

© Published and reproduced with kind permission by Global Legal Group Ltd, London

ChinaZhan Hao & Song Ying

AnJie Law Firm

Overview of merger control activity during the last 12 months

In 2019, the State Administration for Market Regulation (“SAMR”) cleared a total of 465 merger cases, a slight rise compared to 448 in 2018. No cases were blocked, and five cases were conditionally approved in 2019, one more than the four in 2018. That brings the total number of clearance decisions issued from 2008–2019 to 2,900, aggregate to RMB 45tn in transaction value (equivalent to USD 6.7tn). Faced with the increasing workload, the SAMR continued to expedite the review process for simplified-review transactions while focusing on the more complicated and competition-threatening deals. In 2019, more than 75% of the filings were reviewed under simplified procedure, and the average period for these simplified reviews lasted less than 20 days from case acceptance to approval. By contrast, the review period for the five conditionally approved cases lasted on average approximately one year, with all of them being pulled and refiled to avoid expiration of the statutory time limit for review.In 2019, the SAMR conditionally approved five cases in total. Of the five conditionally approved cases, one involved both structural and behavioural remedies and the other four cases were cleared with behavioural remedies imposed. Among the four cases with behavioural remedies, hold-separate commitments were made in three of them and scheduled to expire in two to five years. Other behavioural remedies include continuous supplies on FRAND terms and abstention from tie-in sales. In 2019, the SAMR kept strengthening its enforcement action against “gun-jumping” behaviour. The SAMR investigated 36 gun-jumping cases and handed out 17 penalties.In addition, there were also some legislative activities related to China’s merger control regime. Specifically, the SAMR spent a lot of efforts on drafting the amendment to the Anti-Monopoly Law (“AML”) in 2019. On January 2, the SAMR published the first draft amendment to the AML (“draft amendment to the AML”) to solicit public opinions, and in this draft, there are a number of changes related to the merger review regime. On January 7, 2020, the SAMR published the draft Interim Regulation for Merger Control for public comment, which attempts to consolidate six existing merger-control-related regulations. In 2019, the SAMR signed antitrust MOUs with 13 jurisdictions, including the EU, Japan and South Korea, and strengthened communications and exchanges with the US and EU authorities on important enforcement cases to share experience and coordinate approaches.

New developments in jurisdictional assessment or procedure

Three notable developments occurred with respect to jurisdictional assessment and procedure in 2019.



AnJie Law Firm China

• First, the SAMR continued to strengthen its enforcement effort against gun-jumping behaviour, whereby the merging parties implemented the transaction before obtaining approval from the SAMR. In 2019, the SAMR issued 17 penalty decisions against gun-jumping, totalling RMB 6.9m in fines (up from 15 penalties and 5.8m in fines in 2018). Worthy of note is that two cases concerned the acquisition of minority stakes as small as 23.53% and 23.6%, respectively, and one case was implemented just one day before the lapse of the public-comment period. These penalty decisions demonstrated the unwavering resolve of the SAMR to fight against gun-jumping.

• Second, the draft amendment to the AML proposes major changes to merger review jurisdiction. It proposes to empower the SAMR to promulgate and revise notification thresholds in accordance with economic development and sector scale. It further proposes to authorise the SAMR to impose a fine of up to 10% of the turnover in the preceding year for gun-jumping and for breaching the commitments made in conditional clearances.

• Third, the draft Interim Regulation for Merger Control proposes to change certain jurisdictional rules while combining six existing regulations. Under the draft rules, the following situation will not qualify for simplified review: (i) a joint venture under joint control by two undertakings is put under sole control by one of the undertakings; and (ii) the joint venture and the acquirer undertaking compete in the same relevant market with their combined market share exceeding 15%. The draft rules also permit a target undertaking to submit to the SAMR that the case is not eligible for simplified review. Furthermore, the draft rules allow the SAMR to call on provincial market regulators to assist in merger review and gun-jumping investigations.

With the dates for the adoption of the AML amendment and the Interim Regulation having not been determined, it can be expected that the final version may be further amended after receiving public comments.

Key industry sectors reviewed and approach adopted to market definition, barriers to entry, nature of international competition, etc.

Taking the 358 simple cases in 2019 published by the SAMR as the sample, a review of the 10 key industry sectors in 2019 is as follows:

Rank Industries Case Number1 Automobiles & Parts 41

2 Oil & Gas and Chemicals 36

3 Financial Services, Investment and Insurance 36

4 Transportation and Logistics 28

5 Commercial Support & Professional Services 25

6 Technology, Hardware & Electronics 24

7 Mining & Metals and Materials 23

8 Industrial Engineering and Equipment 22

9 Real Estate and Hotel 16

10 Healthcare 15

11 Others 92

Total 358




The notifying party shall define the relevant market based on the businesses with horizontal overlaps, a vertical relationship (referring to an upstream or downstream relationship) and/or with an adjacent relationship (referring to a series of products that are complementary or have the same customer base). Observed from the merger review practice in China, demand-side substitutability is the major consideration in defining the relevant market. When supply-side substitutability produces the same restriction in the competition with demand-side substitutability, supply-side substitutability shall also be taken into consideration. The definition of the relevant market includes two dimensions, the definition of the relevant product market and of the relevant geographic market.In defining the relevant product market from the demand-side substitutability perspective, factors to be considered include: • Evidence that consumers will turn to or consider turning to other products because of

the change of price or other competition elements.• The appearance, nature, quality, technical features and other overall characteristics as

well as utility of the products.• Difference in pricing. • Marketing channels.• Other essential factors, such as, preference of consumers, dependence of consumers

upon the product, barriers, risks and costs confronted by the majority of the consumers when they turn to substitutes, whether there is price discrimination, etc.

In defining the relevant product market from the supply-side substitutability perspective, the following basic factors will be considered: • Evidence to prove the way that other producers respond to the change of price or other

competition elements.



• The competitors’ manufacturing process and techniques, difficulties, time to be consumed, extra costs and risks in changing the line of production, the competitive ability of the products produced after changing the line of production, and marketing channels, etc.

In defining the relevant geographic market from the demanders’ perspective, factors to be considered include:• Evidence that consumers will turn to or consider turning to other geographic areas to

buy products because of the change of price or other competition elements.• Transportation costs and nature of the transportation.• The geographic scope within which consumers actually buy the relevant product and

the product distribution of the major competitors.• Geographic trade barriers, including customs tariff, local regulations, environment

protection, and technical elements, etc.• Other essential factors, e.g., specific preference of the customers in a specific geographic

area and the inbound and outbound flows of the relevant product. In defining the relevant geographic market from the suppliers’ perspective, basic factors to be considered include: • Evidence that proves the way undertakings in other geographic areas respond to the

change of price or other competition elements. • Instantaneity and feasibility of the supply from other regions, for example, the cost for

costumers to turn to producers located in other regions.When conducting the competitive analysis, the case handler may consider the offsetting effect produced by a potential competitor entering the market. If the relevant market entry is very easy, potential competition concerns may be relieved to some extent, subject to specific situations in individual cases. When judging the degree of difficulty in entering the relevant market, factors such as the total cost of entry, the legal or factual restraints on entry, the limitation due to intellectual property rights, the importance of the scale economy for production and distribution of the products, as well as the availability of raw materials and infrastructure are usually taken into consideration so as to fully evaluate the possibility, timeliness and adequacy of the market entry.

Key economic appraisal techniques applied, e.g., as regards unilateral effects and co-ordinated effects, and the assessment of vertical and conglomerate mergers

Regarding PRC merger review, the Ministry of Commerce (“MOFCOM”)/the SAMR attaches importance on economic analysis to a review of concentrations of undertakings applicable to the normal filing procedure. Especially for cases incurring competition concerns, economic analysis would be even more important. In practice, both the filing parties and MOFCOM/the SAMR resorted to economic experts for specific competition analysis in high-profile or hard cases. For instance, such as in MTK/MStar, Thermo Fisher/Life Tech, Merck/AZ Electronic Materials, ASE/Silicon Precision, UTC/Rockwell Collins, Photop/Finisar and the recent Danaher/GE Medical & Life Sciences Biopharmaceutical case, MOFCOM/the SAMR retained economists to analyse the relevant competition issues of the concentrations. Particularly, in the Thermo Fisher/Life Tech deal, MOFCOM announced its engagement of economic experts focusing on quantitative analysis. Although MOFCOM/the SAMR did not publicly disclose, it would not be rare in practice that the filing parties had sought for specific economists to help relieve or resolve the competition concerns. Article 5 of the Guidelines on Notification Documents of Concentration of Undertakings (Revised in September 29, 2018), providing that economic analysis could be applied in the




market definition if necessary, is observed as the fundamental statutory provision among others. Although the AML and relevant regulations have no further provisions elaborating economic evaluation techniques, in practice, it is common for the authority using quantitative methods on economic analysis, including the Herfindahl-Hirschman Index (“HHI”) and markets share figures. To illustrate this, the SAMR imposed restrictive conditions on five merger cases in 2019, with tailored remedies in each transaction to address different competition concerns, and, when assessing the competitive effects of the concentrations, the authority particularly specified in its announcements that both quantitative methods and non-quantitative methods applied. To be specific, on one hand, it is observed that HHI is one of the most prominent factors to analyse the competition landscape of the relevant market, before and after the transaction. HHI is a common measure of market concentration and is applied to determine market competitiveness for pre- and post-M&A transactions. For instance, the Cargotec/TTS, Photop/Finisar, Zhejiang Garden Bio-chemical/DSM/JV, and Novelis/Aleris cases all cited HHI to support the conclusion that the market power of merged entity or undertakings to the concentration would be significantly enhanced after the transaction. On the other hand, the authority also regards market shares of each undertaking to concentration in each relevant market and combined market shares of such undertakings after the transaction as the very core indications in their reviews to assess whether the transaction would lead to elimination or restriction of market competition. No matter how exceptional a deal can be, we would still expect that the SAMR will pay most attention to the market share data.In addition to the above, the SAMR also relies on figures, statistics, percentage, increment and other quantitative economic analysis due to their relative accuracy, high objectivity and operability. However, it is not to say that, in practice, non-quantitative economic factors do not play an important role for a merger review process. These can include market entry barriers, upstream and downstream foreclosure, consumer welfare, capability and incentive of bundling and tying that may result from the transaction, etc. In fact, such aspects were all comprehensively examined in five remedy cases published by the SAMR in 2019.In the cases relating to horizontal overlap, various non-quantitative economic factors may be considered, such as whether the entry barrier may impede any effective competitor to enter a relevant market in the short term, or whether manufacturers restrict the expenditure capability and procurement quantity of bidders. For example, in the cases of Cargotec/TTS, Photop/Finisar, Zhejiang Garden Bio-chemical/DSM/JV, the SAMR concluded that the transaction would eliminate the competitive relationship between the undertakings to the concentration, strengthen the market power of the merged entity and weaken the relevant market competition.Where there is a vertical relationship, the SAMR usually also focuses on certain indexes to enhance the effectiveness of economic analysis in the merger review, such as the countervailing power of the upstream buyer or downstream customer influenced by the transaction. In the KLA-Tencor/Orbotech case, the SAMR cited the adhesiveness of a user as an indication of buyer’s bargaining power and capability of switching suppliers. Foreclosure effect analysis would be relatively significant for merger review on transactions with vertical relationships. Moreover, the SAMR also frequently examines whether the transaction may increase the incentive and the capability of the concentration parties to violate the AML, i.e. implementing the monopolistic conducts such as bundling and tying. For example, in the KLA-Tencor/Orbotech case, the SAMR considered the concentration parties would have the capability and incentive of bundling and tying in the relevant semiconductor markets, given that the merged entity had solid market power. The SAMR may also focus on that after the transaction, concentration




parties would have the incentive to cross-subsidise among different markets through conditional bundling and tying by leveraging its market power to other markets, so as to exclude and marginalise its competitors and even force them to be delisted from the market. Similarly, in the KLA-Tencor/Orbotech case, the SAMR concluded that the concentration parties would have the incentive and capability to impose unreasonable trading conditions after the transaction. No matter what economic techniques the authority adopts in an individual merger review process, the protection of customer welfare will be the ultimate goal for eliminating the competition concerns. Following with the major development of the worldwide industries and changeable trends of M&A, we expect that the AML and China’s antitrust enforcement may embrace a new era for economic techniques to be used in a merger review process.

Approach to remedies (i) to avoid second stage investigation, and (ii) following second stage investigation

Phase II in-depth investigation and follow-up investigation processes are applicable for the EU merger review. Once the European Commission initiates a Phase II in-depth investigation, the filing parties shall likely offer a commitment to urge a clearance decision. The filing parties would like to offer a remedy which could effectively address the competition concern during Phase I rather than entering into an in-depth Phase II investigation.On the contrary to the EU merger review, in China, in accordance with Article 6 of the Rules on Restrictive Conditions on the Concentration of Undertakings (for Trial Implementation) (“Rules”), filing parties should submit their Draft Implantation Plan (“DIP”) for commitments to restrictive conditions within 20 calendar days before the statutory deadline of Phase II review process in response to the SAMR’s competition concerns. In practice, the authority generally informs filing parties of their competition concerns during the Phase II review process, and would not enter into the remedy-negotiation process until they officially put forward the competition concerns. Once the competition concerns are raised by the SAMR, the filing parties could either undertake to adopt (i) a structural remedy, (ii) a behavioural remedy, or (iii) the combination of structural and behavioural remedies depending on specific situations in individual cases to the case handling team.Furthermore, the Measures for Review on Concentration of Undertakings (“Measures”) and the Rules do stipulate the determination process of remedies. Specifically, the Measures stipulates that the Chinese antitrust authority shall inform the filing parties of their concerns on concentration that may have the eliminating or restricting effects on market competition and shall allow filing parties to defend in writing within a reasonable period. Additionally, both of the Measures and the Rules provide that during the whole process of merger review, the filing parties shall be entitled to submit the DIP to the Chinese antitrust authority. The DIP aims to eliminate or alleviate the authority’s competition concerns but not to impede the benefits resulting from the transaction. Additionally, Article 5 to 9 of the Rules provides the DIP proposed by the filing parties should be satisfied with three criteria, i.e. effectiveness, feasibility and promptness: (a) first, the DIP should be effective enough to eliminate the potential anticompetitive effects on the relevant market; (b) second, the DIP should be practically feasible to be operated; and (c) last but not least, the DIP should be able to promptly solve the competition concerns caused by the concentration. The authority may negotiate with the filing parties for DIP revisions and adjustments several times and consult with other governmental agencies, trade association and related stakeholders through various approaches, such as questionnaires, seminars, hearing conferences, etc. In general, the DIP might be revised and adjusted several times until it is finalised and eventually announced by the SAMR. If the DIP cannot relieve or resolve the related competition issues,




the SAMR may block the deal according to the AML. In practice, if remedies cannot be agreed on within the statutory time limit, the SAMR may request the filing parties to withdraw the notification and re-file it. In 2019, the SAMR imposed remedies on five merger cases. In the Novelis/Aleris case, a combination of structural and behavioural remedies was imposed, while only behavioural remedies were imposed in the other cases. For these complex transactions, the SAMR carried out an in-depth review, and pull-and-refile became the usual practice for “hard cases”, which indeed happened in all five conditional cases (see the chart below).

Filings Cleared with Restrictive Conditions in 2019 by the SAMR

No. Date of Decision Case Name Filing/Re-filing Types of Restrictive

Conditions

1 Dec 20, 2019 Novelis/Aleris Initial filing on Aug 31, 2018; re-filed twice

Structural and behavioural conditions

2 Oct 18, 2019Zhejiang Garden

Bio-chemical/DSM/JV

Initial filing on Apr 12, 2018; re-filed once

Behavioural conditions

3 Sep 23, 2019 Photop/Finisar Initial filing on Dec 29, 2018; re-filed once


4 July 12, 2019 Cargotec/TTS Initial filing on Jun 15, 2018; re-filed once


5 Feb 13, 2019 KLA-Tencor/Orbotech

Initiation on Apr 28, 2018; re-filed once


In order to accelerate the approval of filings for cases that may incur competition concerns, there are several suggestions which may expediate the review process: • First, preparing remedy schemes during the filing preparation. In this regard, filing

parties could be able to promptly adjust commitment proposals in response to the potential competition concerns by the SAMR.

• Second, trying to learn the SAMR’s theory of harm/competition concern in the early stage of the Phase II review process.

• Third, trying to obtain consent/positive feedback from related stakeholders regarding the proposed commitments.

Key policy developments

On January 2, 2020, the SAMR began to solicit public opinions on the draft amendment to the AML. Notably, this is a landmark for the AML, since this is the first revision to the basic law of anti-monopoly since it was implemented in 2008. From a merger control view, this draft amendment to the AML brings some significant upgrades in the following aspects:• The draft amendment to the AML supplemented the identification factors of the dominant

market position of competitors in the Internet field, namely network effect, economies of scale, lock-in effect and the ability of enterprises to grasp and process relevant data. This indicates that anti-monopoly law enforcement in the Internet sector may be strengthened in the near future.

• In the review process of merger control, the draft amendment to the AML establishes a mechanism of “stop the clock”. Specifically, when (a) the filing parties agree to suspend




the review process, (b) the filing parties are required to submit supplementary materials by the SAMR’s Request for Information, or (c) the SAMR negotiates with the filing parties on possible restrictive conditions. Under any of these circumstances, the review process will pause and the passing time will not be counted.

• The draft amendment to the AML significantly increases the maximum penalty for failure to file for merger control, from the current RMB 500,000 (approximately USD 72,000) to 10% of the parties’ turnover in the preceding year.

Furthermore, another important draft regulation was released on January 7, 2020. The Interim Provisions on Review for Concentration of Business Operators (Draft for Comment) will be a crucial regulation in the merger review arena. It is a combination of six merger control legislations issued by the former regulator MOFCOM and a draft regulation. This draft is not only a measure to transform the former regulations to the SAMR, it may also bring some changes to the merger control review procedures. The most significant provisions in this draft are summarised as follows:• The SAMR could commission its provincial branches to review the merger control cases.

Since the first day when the anti-monopoly authority was established, this administrative power has not been granted to any provincial authorities. This measure could relieve the increasing workloads of merger control filings to the SAMR.

• Article 18 of this draft clarifies situations that could not apply simplified procedure. For instance, when a joint venture jointly controlled by two or more operators is solely controlled by one of the operators after transaction, and the operator has a horizontal relationship with the joint venture. If the sum of the market shares is more than 15%, the filing cannot be reviewed under the simplified procedure.

However, the above two draft legislations are still far away from the final articles of law, and some specific details may be revised in its next versions.

Reform proposals

In 2020, the SAMR will continue to push forward the amendment of the AML. It is expected that the final draft amendment to the AML will be released within this year and submitted to the National People’s Congress for discussion in early 2021. The number of merger control cases may rise sharply if the statutory penalty is significantly lifted in the new AML. Accordingly, if the workload of the SAMR increases dramatically, the ordinary procedure cases may face a longer review timeline caused by the “stop the clock” mechanism. From the practical perspective, a few reform proposals as follows are put forward:• First, it is suggested that the SAMR publish all of its review decisions on its website, to

further enhance the transparency of its merger review practice.• Second, for pure foreign transactions that have no effect on the Chinese market, it is

suggested that less information is required for review so as to reduce the filing parties’ burden for information collection.

• Third, more detailed rules or explanations about the assessment of control is suggested to be published, so that the undertakings could make a better self-assessment in practice.

• Fourth, rules or limitations on SAMR’s voluntary merger review of cases that do not reach the statutory threshold are suggested to be specified.




Zhan HaoTel: +86 10 8567 5966 / Email: [email protected] the pioneer competition lawyer in the PRC, Dr. Zhan Hao has extensive experience in the fields of concentration filing, antitrust private litigation, government investigation and corporate compliance. Dr. Zhan has successfully represented hundreds of enterprises in merger control filings with the SAMR and MOFCOM, all of which were successfully cleared. His clients range from large state-owned enterprises to renowned multinational companies and medium-sized domestic or foreign companies. Dr. Zhan has also served multiple industries, including automobile, shipping, chemical, energy, finance, pharmaceutical, transportation, machinery, electronics, textile, aviation, consumer goods and software. For example, Dr. Zhan filed the concentration notification for the ChemChina/Syngenta deal with MOFCOM, the biggest deal of SOEs in 2016, and successfully obtained unconditional clearance for the clients.

Song YingTel: +86 10 8567 5979 / Email: [email protected] Ying is a partner at AnJie Law Firm, Beijing office. Ms. Song specialises in antitrust and anti-unfair competition law, providing a wide range of services, including concentration notification, defence to investigation, private antitrust litigation and competition compliance. For merger filings, she has assisted hundreds of clients with successfully obtaining approval within a relatively short period. Her clients cover a wide scope of sectors including aviation, semiconductor, real estate, electronics, high-tech, financial service, chemicals, automobile, textiles, energy, etc. For instance, Ms. Song filed the concentration notification for the ChemChina/Syngenta deal with MOFCOM, the biggest deal of SOEs in 2016, and successfully obtained the unconditional clearance for the clients. In addition, she has also handled many antitrust investigation and private litigation cases, such as cases relating to semiconductors, digital entertainment, LCDs, telecoms, milk powder, auto parts, chemicals and transportation, etc.


AnJie Law Firm19/F, Tower D1, Liangmaqiao Diplomatic Office Building, No. 19 Dongfangdonglu,

Chaoyang District, Beijing 100600, P.R. ChinaTel: +86 10 8567 5988 / URL: www.anjielaw.com

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