On 29 September, the Chinese Ministry of Commerce (MOFCOM) published four decisions sanctioning six companies in total for failing to seek pre-merger clearance under the Antimonopoly Law. All four decisions were adopted on 16 September. The first two decisions relate to the establishment of joint ventures, while the latter two concern share acquisitions.
In the first decision, MOFCOM imposed on each of BesTV and Microsoft a fine of RMB200,000 ($31,000) in relation to the establishment of a joint venture in October 2013. The case was triggered by a complaint made in June 2014, which prompted a MOFCOM investigation in January 2015. Subsequently, MOFCOM found that the parties had signed a contract in September 2013 for setting up a joint venture to engage in designing, developing, producing and selling game applications primarily for Microsoft’s platform, the XBoxOne.
In a similar transaction, MOFCOM imposed a fine of RMB150,000 ($23,000) on each of CSR Nanjing Puzhen Rolling Stock and Bombardier Transportation Sweden for late notification of the establishment of a 50/50 joint venture. The joint venture was set up and received its business licence in November 2014. The parties realised that the transaction might have triggered a merger filing requirement under the Antimonopoly Law. They voluntarily approached MOFCOM and submitted a late notification.
The third decision concerns a minority share acquisition. MOFCOM imposed a fine of RMB200,000 ($31,000) on Shanghai Fosun Pharmaceutical in relation to the acquisition of a 35 per cent stake in Suzhou-based ErYe Pharmaceuticals. The case was triggered by Fosun’s pre-notification consultation with MOFCOM in December 2014 concerning its acquisition of the remainder of ErYe’s shares, during which MOFCOM discovered that Fosun had acquired its initial stake without seeking approval under the Antimonopoly Law.
In the last decision, MOFCOM imposed a fine of RMB150,000 ($23,000) on Fujian Electronics and Information Group for the acquisition of a 35 per cent stake in Shenzhen ZhongNuo Communications. During the public notice period of a simple case procedure where Fujian Electronics’ indirectly-controlled subsidiary Furi Electronics notified MOFCOM of its acquisition of ZhongNuo Communications, a third party informed MOFCOM that Fujian Electronics had already acquired control over Zhongnuo Communications, thereby prompting a MOFCOM investigation in December 2014.
MOFCOM found that every transaction in question – the setting up of the joint ventures in the first two cases and the unreported 35 per cent acquisition of shares in the latter two – gave rise to a concentration under Articles 20 and 21 of the Antimonopoly Law and that the transactions met the filing thresholds set out in Article 3 of the State Council’s Regulation on Notification Thresholds for Concentration of Undertakings. Every transaction was therefore clearly subject to a pre-merger clearance requirement. By failing to notify the reportable transaction, the parties were in violation of the Antimonopoly Law.
For each case, MOFCOM explained that upon reviewing the transaction’s effects on competition, it had concluded that the transaction did not restrict or limit competition. Accordingly, no transaction was ordered to be unwound. Additionally, the following features served as mitigating factors for the companies: in the first two cases the companies endeavoured to cooperate in the investigations and made “supplementary” notifications and, in the latter two cases, notwithstanding the 35 per cent acquisitions in question, each company had notified MOFCOM (either by itself or through its subsidiary) of its intended acquisition of additional shares in the target companies. As a result of these factors, MOFCOM fined each of the infringing parties an amount that is less than the maximum statutory amount (RMB500,000).