CHINA Law and Practice Contributed by: Liu Cheng, Li Yumeng, Ye Hongtao and Jiang Hanxue, King & Wood
considered when assessing the impact of a concen - tration on competition. For example, in practice, for transactions that involve products on which the Chinese market and customers are relatively dependent, especially where input fore - closure is likely to occur, or where the concentration may enhance the ability and incentive of competitors in the relevant markets to co-ordinate on price, the SAMR may impose the remedy of continuing to sup - ply relevant products to the Chinese market on Fair, Reasonable, and Non-Discriminatory (FRAND) condi - tions. This is evidenced in the various cases granted conditional clearance by the SAMR. For example, in the Bunge/Viterra case, the SAMR required the par - ties and the post-concentration entity to continue to supply soybeans, barley and rapeseed to the Chinese market under the FRAND principle as it considered that the transaction would enhance the market con - centration of the imported soybean trade market, the imported barley trade market and the imported rape - seed trade market while enhancing the market power of Bunge and adversely affecting the supply to the Chinese market. In addition, when it comes to complex transactions involving strategically important and sensitive sec - tors, the SAMR is inclined to take a more interven - tionist approach. For example, in the Qualcomm/NXP case, although factors such as the lengthy review time overlapped with the China-US trade war and transaction-specific concerns about impacts on the semiconductor industry may have added some com - plications to this case review, Chinese stakeholders consistently complained that the transaction would expand Qualcomm’s patent licensing business into mobile payment and autonomous driving areas and that the remedies the parties offered to the European Commission would not be sufficient to address com - petition concerns in China. The Qualcomm/NXP case may be indicative of the broader policy considera - tions of the SAMR in China to ensure that domestic companies have access to IP rights or other inputs on reasonable terms. Per Article 37 of the AML, concentration of undertak - ings in sectors that significantly impact the national economy and people’s livelihood would be under
more rigorous scrutiny. The internet, finance, technol - ogy, pharmaceuticals, public utilities and the media are generally considered as key industry sectors. In practice, transactions within these key sectors are therefore likely to undergo more rigorous and meticu - lous review processes by the SAMR. 4.7 Special Consideration for Joint Ventures There are no express provisions under the AML pro - viding for any special considerations for joint ven - tures (JVs), but the SAMR may particularly focus on whether there is potential co-ordination between the JV parents and whether there are non-competition arrangements between JV parents and between the parents and the JV. For example, in the conditionally approved case of the establishment of a JV between Zhejiang Garden Biochemical High-Tech (ZGBH) and Royal DSM (DSM), the SAMR paid special attention to the potential co-ordination between the JV parents from the exchange of competitively sensitive informa - tion through the JV. ZGBH and DSM are the top two competitors for animal use of vitamin D3 both globally and in China, with a combined market share of more than 50%. Through the transaction, ZGBH and DSM proposed to establish the JV to produce DHC (the core material for making vitamin D3 for animal and human use), while ZGBH and DSM would purchase DHC from the JV for the production of vitamin D3 for animal and human use. The behavioural commitment accepted by the SAMR in this case included: • holding the parties’ business activities separate, except for DHC, thereby ensuring continued com - petition in the vitamin D3 markets; • establishing firewalls concerning the operational activities of the JV, which would prevent ZGBH and DSM from exchanging competitively sensitive information via the JV; • limiting the JV’s activities strictly to the production of DHC; and • prohibiting ZGBH, DSM and the JV from disclos - ing the prices of cholesterol and vitamin D3 to third parties unless mandated by a client, government authorities or applicable law.
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