CHINA Trends and Developments Contributed by: Wei Yingling, JunHe LLP
the business relationships (including horizontal overlaps, vertical relationships and conglomer - ate relationships) between the undertakings par - ticipating in the transaction so as to define the relevant markets. Specifically: (a) In terms of a merger, the relevant market shall be defined mainly based on the busi - ness relationships between the undertak - ings to be merged. For example, if Under - taking A merges with Undertaking B, and both A and B engage in the business X, the relevant market shall be defined based on business X that constitutes a horizontal overlap between A and B. (b) In terms of a share/asset acquisition or the acquisition of control through other methods (such as through contracts), the relevant market shall be defined mainly based on the business relationships be - tween the target undertaking/asset and the undertaking(s) that are to acquire control over the target undertaking/asset. For example, if Undertaking A acquires control over Undertaking/Asset B, and A engages in business X and B engages in business Y, while X is a raw material of Y, the relevant markets shall be defined based on both X and Y, which constitutes a vertical relation - ship between A and B. (c) In terms of the establishment of a joint venture (JV), the relevant market shall be defined mainly based on the business relationships between the JV and the JV shareholders that are to control the JV. For example, if Undertakings A, B and C intend to jointly establish a JV, while only A and B will control the JV, the business relation - ships between A and the JV as well as be - tween B and the JV need to be considered in defining the relevant market.
(d) In particular, in the event that the target or the newly established JV will only provide products or services to its shareholders, and if such products/services constitute an independent product market (ie, there exist independent third-party undertak - ings that provide such products/services to the external market), (b) and (c) above are applicable. If such products/services do not constitute an independent product market based on industrial practice, it would be fine not to define relevant markets based on such products/services themselves, but the markets that will be affected by such products/services (eg, the upstream inputs or downstream outputs) shall be defined. A case-by-case basis approach in delineating relevant markets is emphasised in the Horizontal Guideline, and for the first time, it is provided that the relevant market may be left open if there are multiple possibilities of defining the market, and in such a case, a competition analysis needs to be conducted for each potential relevant market. The above rules generally reflect the prevailing practice of SAMR which is documented in the Horizontal Guideline, providing clearer guidance with more predictability. Quantitative criteria in assessing market power The Horizontal Guideline, for purposes of pre - liminary analysis on the level of anti-competitive impact, sets forth quantitative criteria of market share and market concentration. In terms of market share, the Horizontal Guide - line sets out five ranges of combined market shares for the merged entities in a horizontal merger and their respective levels of anti-com - petitive impact, as set out below:
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