CHINA Law and Practice Contributed by: Liu Cheng, Li Yumeng, Ye Hongtao and Jiang Hanxue, King & Wood
There is no statute of limitations on the SAMR’s ability to investigate a transaction. 2.12 Requirement for Clearance Before Implementation A transaction may not be closed before clearance. 2.13 Penalties for the Implementation of a Transaction Before Clearance Pursuant to Article 58 of the AML, if undertakings implement the transaction before clearance and the transaction thereby has the effect of eliminating or restricting competition, the SAMR may at its discre - tion impose the following sanctions on the undertak - ings: • an order to cease implementing the concentration; • an order to dispose of the shares or assets within a specified period of time, transfer business within a specified period of time, and take other necessary measures to restore the status quo ante; and/or • a fine of up to 10% of the previous financial year’s sales revenue. There is a fine of up to CNY5 million if the concen - tration of undertakings does not have the effect of excluding or limiting competition. Trial Discretion Benchmark The final amount of the penalty will be determined based on the Trial Discretion Benchmark. Key rules • There is an initial amount of CNY2.5 million, sub - ject to several mitigating and aggravating factors. Mitigating factors, such as voluntarily reporting and voluntarily taking corrective measures, may result in a lower initial amount of CNY1 million, while aggravating factors, such as obstruction of enforcement or refusal to co-operate, may result in a higher initial amount of CNY4 million. • On top of the initial penalty amount, each down - ward adjustment factor reduces the penalty by 10%, and such downward adjustments may add up to no more than a 60% reduction, while each and procedures include the following. Cases with no competition concerns There is a three-step approach:
upward adjustment factor increases the penalty by 10%. (a) Downward adjustment factors include: (i) no actual operation or production, or no effective exercise of control; (ii) first-time offence; (iii) proactive co-operation with the investiga - tion, providing truthful statements of facts and important evidence; (iv) proactive rectification, establishing or improving the antitrust compliance system and effectively implementing such system; (v) the concentration is above the thresholds yet the turnover of the undertaking within China in the previous fiscal year was be - low CNY800 million and the undertaking proactively co-operates; and (vi) other factors determined by the SAMR. (b) Upward adjustment factors include: (i) providing misleading or false materials or information to the SAMR; (ii) adopting passive approaches such as delaying, slacking or evading, and thus failing to co-operate with the investigation or provide relevant materials; and (iii) other factors determined by the SAMR. • The SAMR will finalise the penalty amount consid - ering the particularity of the case. Normally, all pen - alties imposed should be subject to the maximum penalty amounts. In cases of severe violations, the SAMR may at its discretion impose a penalty rang - ing from two to five times the maximum penalty amounts provided in the AML. Cases with competition concerns The penalty amount will be calculated in reference to the methods set out above, while considering factors such as the duration and scope of the anti-competi - tive effects, efforts in remedying the illegal concentra - tion, etc. Undertakings Undertakings may be exempted from administrative sanctions in certain circumstances such as first-time offence plus voluntary reporting, and restoring to pre- concentration status.
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