CHINA Law and Practice Contributed by: Liu Cheng, Li Yumeng, Ye Hongtao and Jiang Hanxue, King & Wood
5. Decision: Prohibitions and Remedies 5.1 Authorities’ Ability to Prohibit or Interfere With Transactions Under the AML, a concentration may not be imple - mented until a clearance is obtained. If the SAMR concludes that the concentration of undertakings has or may have anti-competitive effects, it may render a decision prohibiting the concentration or imposing restrictive conditions. Decisions not to approve or to conditionally approve are published on the SAMR’s official website. 5.2 Parties’ Ability to Negotiate Remedies When the SAMR has competition concerns about a transaction, it will inform the parties of its concerns and require them to provide remedy proposals within a specified timeframe. The parties may then propose structural and/or behavioural remedies to the SAMR. Remedies typically used in practice include: • structural conditions such as divestiture of tangible assets, intangible assets including IP rights, data, or relevant rights and interests; • behavioural conditions such as providing access to infrastructure, including networks or platforms, licensing key technologies (including patents, know-how or other IP), terminating exclusive agreements, modifying platform rules or algo - rithms, offering compatibility or not reducing the interoperability level; • a “hold separate” condition, which is a rather unique approach employed by the SAMR in some cases where the acquired business is required to remain independent for a certain length of time after the merger; while the “hold separate” con - dition may be categorised as behavioural, the SAMR has publicly expressed that this condition is intended to achieve similar effects as structural conditions; and • comprehensive conditions, combining both struc - tural conditions and behavioural conditions. There are no express provisions within the AML or its accompanying regulations providing for whether rem - edies are required to address non-competition issues.
However, in the Korean Air/Asiana Airlines case, the SAMR imposed a restrictive condition that the par - ties must take reasonable and necessary data protec - tion measures and establish a data protection system when the acquired entity withdraws from and changes the relevant airline alliance, reflecting the authority’s concerns about data. Therefore, it appears that the SAMR may require the parties to resolve non-com - petition issues prior to clearance. 5.3 Legal Standard According to Article 39 of the Provisions on Concen - tration Review, the SAMR will evaluate the effective - ness, feasibility and timeliness of the remedies. If the remedies can effectively reduce the adverse effects of the concentration on competition, the SAMR may decide to approve the concentration with restrictive conditions. Otherwise, the remedies will be deemed unacceptable and the SAMR can decide to prohibit the concentration. 5.4 Negotiating Remedies With Authorities Parties may propose remedies either before or after the SAMR informs the parties that the concentration has or may have anti-competitive effects. The SAMR may propose remedies to the parties, but it cannot force them to accept. The SAMR will evaluate the remedies proposed by the parties and inform them of the result. Only when the parties and the SAMR agree on the proposed remedies can such remedies be imposed on the transaction’s approval. Parties can voluntarily propose remedies to and nego - tiate with the SAMR at any stage of the review pro - cess, including Phase I, Phase II and Phase III. Parties can also propose remedies if the SAMR raises compe - tition concerns in Phase II. In practice, the negotiation of the proposed remedies between the SAMR and the parties usually occurs in Phase III. 5.5 Conditions and Timing for Divestitures According to Article 38 of the Provisions on Concen - tration Review, during the review process, the SAMR may inform the parties of competition concerns and ask the parties to submit a written remedy proposal within a specified timeframe. The SAMR may solicit public opinions on the remedy proposal from govern -
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