Monday, April 8, 2013
According to Davis Polk, MOFCOM in China is looking to simplify pre-merger review for a large class of relatively "simple" (read small) transactions.
The draft regulation – which is not dissimilar to draft proposals recently announced by the European Commission – designates as “simple” three (arguably narrow) cases premised upon the merging parties having low market share post-merger:
- Horizontal mergers in which the parties together have under 15% share in a relevant market;
- Vertical mergers in which the parties have (a) a vertical relationship, and (b) under 25% share in the “vertical market”; and
- Mergers where the parties (a) do not have a vertical relationship, and (b) have under 25% share in all markets.
While in the US we use transaction size as the cut-off for initial review, the Chinese will be using market share. Transaction size tests are arguably simpler to enforce and simpler for parties to get their head around. On the other, market share tests will ensure plenty of work for lawyers.