CHINA Trends and Developments Contributed by: Wei Yingling, JunHe LLP
close competitive relationships, lack of effective competition constraints from other competitors, and lack of potential competitors. When consid - ering unilateral effects, SAMR will pay attention to the negative impact of dynamic competition and comprehensively consider other factors on a case-by-case basis. Especially for concentra - tions involving bilateral or multilateral platforms, such bilateral or multilateral business will be considered, and direct and indirect network effects will be evaluated. As for co-ordinated effects, the situations where SAMR will identify them mainly consist of where: • a consensus exists among undertakings to impair competition (such as direct price increases, production restrictions, restrictions on new production capacity entering the mar - ket, market allocation or bid rigging); • undertakings that have reached such a con - sensus can maintain the consensus, and if there is any deviation, effective punishment will be imposed; and • competitors, new market entrants or custom - ers that do not participate in the co-ordinated behaviour will not pose a threat to the stability of the co-ordinated behaviour. On this basis, when considering co-ordinated effects, SAMR will mainly evaluate whether a concentration is conducive to promoting co- ordinated behaviour, ie, whether it is conducive to enhancing the ability, motivation and possi - bility of entities and other competitors to jointly exclude and restrict competition after the con - centration. Offsetting elements: potential competitors, market entry, buyer power and efficiency The Horizontal Guideline stipulates four types of elements that may offset any unilateral or co-
ordinated effects caused by a concentration, as set out below: • Potential competitors: Potential competi - tors refer to those that have not yet entered the relevant market but have the ability and motivation to enter in the short term. Such undertakings may pose certain competitive constraints on existing competitors. • Market entry: New market entry that meets the conditions of possibility, timeliness and adequacy may effectively address or restrict any anti-competitive effect caused by the concentration. • Buyer power: Strong buyer power may effectively offset certain anti-competitive effects, such as limiting the possibility of price increase due to the concentration. Buyer power could be assessed by considering both the concentration level of buyers and the buyers’ ability to switch between different suppliers. • Efficiency: Efficiency refers to the efficiency improvement that may be brought about by a concentration, including cost savings brought by economies of scale and scope, as well as the innovation efficiency brought by promot - ing technological progress and improving the quality of goods. To be recognised by SAMR, three conditions need to be met: the efficien - cy gains must be directly or indirectly benefi - cial to the consumers, they must specifically derive from the concentration, and they must be verifiable. The framework of competition analysis set out in the Horizontal Guideline provides a unified refer - ence both for SAMR and for the undertakings of the concentration, and it is converging with the rationale and practice of other major jurisdictions such as the EU. The bidirectional characteristics of the guideline could help to further improve the
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