CHINA Law and Practice Contributed by: Liu Cheng and Li Yumeng (Audrey), King & Wood Mallesons
evant markets to co-ordinate on price, SAMR may impose the remedy of continuing to sup - ply relevant products to the Chinese market on FRAND conditions. This is evidenced in the various cases granted conditional clearance by SAMR. For example, in the SK Hynix/Intel case, SAMR required the merged entity to continue to supply all products to the Chinese market under the FRAND principle as it considered that the transaction would enhance the market concen - tration of the SATA enterprise-class SSDs mar - ket and the PCIe enterprise-class SSDs market while enhancing the market power of the merged entity and adversely affecting the supply to the Chinese market. In addition, when it comes to complex transac - tions involving strategically important and sen - sitive sectors, SAMR is inclined to take a more interventionist approach. For example, in the Qualcomm/NXP case, although factors such as the lengthy reviewing time overlapped with the China-US trade war and transaction-specific concerns about impacts on the semiconductor industry may have added some complications to this case review, we also saw that Chinese stakeholders consistently complained that the transaction would expand Qualcomm’s patent licensing business into mobile payment and autonomous driving areas and that the remedies the parties offered to the European Commission would not be sufficient to address competition concerns in China. The Qualcomm/NXP case may be indicative of the broader policy consider - ations of SAMR in China to ensure that domestic companies have access to intellectual property rights or other inputs on reasonable terms. Per Article 37 of the AML, concentration of undertakings in sectors that significantly impact the national economy and people’s livelihood would be under more rigorous scrutiny. The
internet, finance, technology and media are generally considered as key industry sectors. In practice, transactions within these key sectors are likely to undergo more rigorous and meticu - lous review processes by SAMR. 4.7 Special Consideration for Joint Ventures There are no express provisions under the AML providing for any special considerations for joint ventures, but SAMR may particularly focus on whether there is potential co-ordination between the joint venture parents and whether there are non-competition arrangements between joint venture parents and between the parents and the joint venture. For example, in the condi - tionally approved case of the establishment of a joint venture (JV) between Zhejiang Gar - den Biochemical High-Tech (ZGBH) and Royal DSM (DSM), SAMR paid special attention to the potential co-ordination between the joint ven - ture parents from the exchange of competitively sensitive information through the JV. ZGBH and DSM are the top two competitors for animal use of vitamin D3 both globally and in China, with a combined market share of more than 50%. Through the transaction, ZGBH and DSM pro - posed to establish the JV to produce DHC (the core material for making vitamin D3 for animal and human use), while ZGBH and DSM would purchase DHC from the JV for the production of vitamin D3 for animal and human use. The behavioural commitment accepted by SAMR in this case included: (i) holding separate the par - ties’ business activities except for DHC, thereby ensuring continued competition in the vitamin D3 markets; (ii) establishing firewalls concerning the operational activities of the JV, which would prevent ZGBH and DSM from exchanging com - petitively sensitive information via the JV; (iii) lim - iting the JV’s activities strictly to the production of DHC; and (iv) prohibiting ZGBH, DSM and the
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