SAMR to expedite certain merger reviews during covid-19

Charles McConnell

07 April 2020

SAMR to expedite certain merger reviews during covid-19

Credit: Shutterstock/Naeblys

China’s competition watchdog has said it will expedite merger reviews in certain industries and exempt collaborations focused on tackling the covid-19 pandemic and helping the economy recover.

China’s State Administration for Market Regulation on Friday announced that it was establishing an expedited merger review channel for deals in the pharmaceutical manufacturing, medical equipment and device manufacturing, food manufacturing and transportation sectors.

The quick review will also apply to transactions among wholesalers, retailers and other businesses closely related to preventing and controlling the epidemic and providing basic living necessities; as well as mergers that help restart production. The SAMR also said it will quickly review transactions in the tourism industry.

The SAMR in February introduced an e-filing system and has cancelled all in-person meetings during the covid-19 outbreak. Parties can either submit electronic merger filings or mail them to the SAMR, which will conduct all correspondence via email or fax.

Businesses and consumers that approach the SAMR for consultations, exemption applications and complaints related to the epidemic and its recovery can expect a response within two working days, the authority said.

Collaborations among competitors will be exempted from the Anti-Monopoly Law if they help China control and recover from the epidemic by aiding technological progress, improving efficiency, benefitting the public interest or protecting consumers, the SAMR said.

The authority said examples of such agreements include those that improve technology for vaccines, testing, medical devices, protective equipment and other related areas; unify product specifications and standards or implement a specialised division of labour to improve quality, reduce costs and increase efficiency; implement public benefits such as disaster relief; or improve the competitiveness of small and medium-sized businesses.

Still, the SAMR said it would also be increasing antitrust scrutiny for businesses involved in several sectors – equipment used in controlling the epidemic, such as masks, medicine, medical devices, disinfectants and the raw materials needed for their production; public utilities such as water, power and gas; and any other industries related to people’s basic living needs.

The authority said it would strictly punish anticompetitive behaviour that impedes the control of the epidemic and hampers the economic recovery, including price-fixing, output restriction, market allocation and boycotts, as well as unfair unilateral price hikes, refusals to deal, tying and discriminatory conduct.

The SAMR said that the market supervision departments at the local level should help companies implement antitrust compliance programmes, adding that industry associations will be given support to self-regulate their industries and maintain market competition.

Michael Han and Joshua Seet, a partner and foreign registered lawyer at Fangda Partners, respectively, issued a client alert on the SAMR’s announcement.

They noted that the SAMR appears “to be re-emphasising the existing exemption framework” under China’s competition law, but said the authority is likely to “be more amenable” to efficiency arguments during the covid-19 pandemic.

The inclusion of compliance in Friday’s notice follows the releases of antitrust compliance guidelines by the central SAMR and the Shanghai branch in December, Han and Seet explained. “In light of the current situation, such similar and other measures to promote antitrust compliance are expected from other local regulators.”

On the merger front, the lawyers said they expect the SAMR to handle mergers outside of the expedited review sectors “under usual timelines”, adding that there has not been any “discernible impact” in how long the authority takes to process simple cases.

“However, for normal case filings and remedy cases, we expect there to be some delays as [the] SAMR has to consult with various stakeholders … during the review process, and these responses may be slower,” the Fangda lawyers said.

The e-filing system has worked well thus far, they said, noting that case handlers have remained available via email and mobile phones.

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