CHINA Trends and Developments Contributed by: Wei Yingling, JunHe LLP
• Joint venture (JV) establishment – the relevant market definition starts from the future business of the JV, and is mainly based on the horizontal, vertical, adjacent and complementary relationships between the undertakings concerned and the JV. Moreover, in cases where the relevant markets identi - fied based on the aforementioned approaches cannot fully reflect the competitive effect of the deal on the market, the SAMR may require the parties to define other relevant markets based on other business, which accounts for more than 5% of turnover and with potential market share over 10%. Market share implication of non-horizontal mergers Similar to the Horizontal Guidelines, the Non-Horizon - tal Guidelines also set detailed quantitative market share criteria which preliminarily indicate the com - petitive effect. • Less than 25%: the SAMR will generally presume that the concentration does not have any anti- competitive effect, unless there is evidence dem - onstrating the following circumstances that warrant further analysis – (a) any party concerned in the concentration is likely to expand rapidly, so that the potential market power of the post-transaction entity might have been significantly underestimated; (b) there is widespread cross-shareholding, in - terlocking directorships (senior executives), or common ownership among the parties; (c) the concentration will lead to integration of competitively significant technologies, re - sources, or other assets (eg, important input, IP, infrastructure, user base or database), which may result in the post-transaction entity obtain - ing significant market power; (d) one of the undertakings concerned could dis - rupt co-ordination in the relevant market; (e) co-ordination in the relevant market taking place currently or in the past, or the fact that the concentration may facilitate co-ordination; (f) the concentration may cause adverse impacts on market entry, technological progress, con - sumers and other relevant undertakings, and the national economy.
• Between 25 and 35%: the SAMR will generally find a relatively low likelihood of anti-competitive effect, but may conduct case-by-case analysis of unilat - eral or co-ordinated effects. • Between 35 and 50%: the SAMR will be inclined to believe the concentration has or may have an anti-competitive effect, and will conduct in-depth analysis. • Beyond 50%: the SAMR will generally presume that the concentration has or may have an anti- competitive effect, unless the parties can prove the contrary. Competition assessment of vertical and conglomerate mergers Similar to horizontal mergers, the possible competi - tion effect caused by non-horizontal mergers is also assessed based on the unilateral and co-ordinated effect, while the theory of harm is different. Specifi - cally: • For vertical mergers, foreclosure is caused by input foreclosure and customer foreclosure based on the combined entity’s ability and incentive to restrict or refuse access by actual or potential upstream or downstream competitors to specific inputs/cus - tomers, or the combined entity’s ability or incentive to increase their costs in obtaining specific inputs/ customers, thereby eliminating or restricting com - petition in the upstream/downstream market. • For conglomerate mergers, foreclosure is caused by the combined entity’s ability and incentive to conduct tying, refusal to deal, reduction of inter - operability, or other exclusionary conduct; trans - mitting its market control to related markets, and therefore harming the ability or incentives of com - petitors in related markets to participate in compe - tition or enter the market; or further strengthening the post-concentration entity’s control in relevant markets, thereby eliminating or restricting competi - tion in relevant markets. While specific and customised factors may be con - sidered respectively for vertical mergers and conglom - erate mergers, both types of non-horizontal mergers share multiple common factors, including:
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