CHINA Law and Practice Contributed by: Liu Cheng and Li Yumeng (Audrey), King & Wood Mallesons
multiple undertakings’ capability, incentive and possibility to eliminate or restrict compe - tition in a collective way. Vertical Concerns For concentration between undertakings active at different levels of the supply chain, SAMR will typically consider the following competition con - cerns: • foreclosure effects, ie, whether the parties to the concentration would have the incen - tive and ability through the concentration to foreclose competitors’ access to inputs or customers; and • SAMR may also consider whether a vertical integration will give rise to the risk of co-ordi - nated effects in the relevant markets. Conglomerate Concerns If there are neither horizontal nor vertical merg - ers, SAMR will apply the conglomerate theories of harm. To address the conglomerate effect, SAMR will typically consider the following com - petition concerns: • unilateral effects, ie, whether the concentra - tion would give rise to the limiting or foreclos - ing of competition through tying or bundling strategies; and • co-ordinated effects, ie, whether the concen - tration could facilitate collusive outcomes by reducing the number of effective competitors. 4.5 Economic Efficiencies Economic efficiency is one of the factors that SAMR considers when assessing the impact of the concentration. Article 34 of the AML provides that SAMR may approve a concentration with anti-competitive effects if the parties prove that the concentration will generate pro-competitive
efficiencies that significantly outweigh its anti- competitive effects. In general, economic efficiencies must (i) ben - efit consumers; (ii) be merger-specific and (iii) be verifiable. The notifying parties must provide relevant information and evidence on the pos - sible efficiencies that can be achieved, the time required, quantification, the level of the resulting benefit to consumers, and whether such efficien - cies can be achieved without the concentration. As of the time of writing, there are no precedents regarding how SAMR assesses or gives weight to economic efficiencies. 4.6 Non-Competition Issues During the merger review, SAMR will mainly consider whether the transaction would have substantial competition concerns. Nevertheless, merger control reviews can also extend to non- competition factors such as national security, industrial policy, etc. As provided by Article 8 of the AML, the state must protect the legitimate operation of under - takings engaged in the industries that are vital to the national economy and national secu - rity where mainly state-owned enterprises are active. In addition, as provided by Article 37 of the Provisions on Concentration Review, factors such as public interest and whether the merg - ing parties are failing companies shall also be considered when assessing the impact of a con - centration on competition. For example, in practice, for transactions that involve products on which the Chinese market and customers are relatively dependent, espe - cially where input foreclosure is likely to occur, or where the concentration may enhance the ability and incentive of competitors in the rel -
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