China Increases Merger Control Filing Thresholds

On 26 January 2024, China’s State Council published its revised “Provisions of the State Council on the Thresholds for the Prior Notification of Concentration of Undertakings” (国务院关于经营者集中申报标准的规定) (the “New Thresholds”), which entered into force with immediate effect. The New Thresholds are available in Chinese here.

In a welcome development, the New Thresholds have significantly raised the turnover thresholds which trigger a mandatory merger filing in China if met. The New Thresholds provide that a transaction is notifiable if, in the previous fiscal year:

(1) (a) the combined global turnover of the merging parties exceeded RMB12 billion (approximately USD1.7 billion), or (b) the combined turnover in China of the merging parties exceeded RMB4 billion (approximately USD567.6 million); and

(2) the turnover in China of each of at least two of the merging parties exceeded RMB800 million (approximately USD113.5 million).

This compares with the previous thresholds of RMB10 billion, RMB2 billion and RMB400 billion respectively, under China’s old rules which were in place since 2008. The previous lower thresholds resulted in a significant number of “no issue” transactions being notified to the State Administration for Market Regulation (the “SAMR”) for review—a considerable inconvenience for the nearly 800 transactions cleared by SAMR in 2023. In this context, the SAMR anticipates that the New Thresholds will cut down the volume of notifications by over 200 annually, or by more than 30 percent.

Importantly, the New Thresholds expressly reiterate the SAMR’s power to ‘call in’ non-notifiable transactions if there is evidence that they are anti-competitive. Clearly the intention behind raising the thresholds is to afford the SAMR the resources to focus on these types of transactions. Going forward, it is to be expected that the SAMR will be more active in its pursuit of such deals and parties will need to factor in the risk of being called-in, especially for high-profile deals in sensitive sectors (technology and semiconductors notably).

Interestingly, a proposed target valuation threshold intended to capture “killer acquisitions” was removed from the published provisions. However, the SAMR will be able to avail of the call-in power to scrutinize these types of deals. 

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Philip Monaghan, an O'Melveny partner licensed to practice law in Hong Kong, England and Wales, and Ireland, Lining Shan, an O'Melveny senior legal consultant, Vivian Wang, an O'Melveny associate licensed to practice law in New York and the District of Columbia, and Cheryl Wong, an O'Melveny trainee solicitor, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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