Overview: Merger Control

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Developments in Merger Control in the Asia-Pacific Region 2008

The past year has seen changes large and small in merger control regimes across the Asia-Pacific region. While the full implications of these changes may not be fully appreciated until the world economy returns to the more robust activity of past years, merger control regimes in the Asia-Pacific region continue to attract attention as their laws and procedures evolve.

In 2008, China's long-awaited merger control legislation became operative. New regulations and guidelines, as well as two published decisions, have provided a clearer picture to companies and counsel of the import of this new arrival. Australia has adopted new merger guidelines and a revised foreign investment policy. Both the Japanese and Korean legislatures are considering amendments to their merger control laws, while the Korean notification threshold has been significantly increased to narrow the focus of its merger review process. New Zealand's laws have been amended to clarify and strengthen the effectiveness of conditions attached to merger clearances, and new procedural guidelines have illuminated the review process. Finally, Singapore's newly minted merger control regime appears to have enjoyed a quiet first 18 months.

This article briefly summarises some highlights of the developments in these jurisdictions in the past year.


The three-channel structure of Australian merger review - in which the Australian Competition and Consumer Commission (ACCC) offers both formal and informal clearance procedures on the basis of a competitive assessment and the Australian Competition Tribunal (ACT) provides merger 'authorisations' on public interest grounds - continues to demonstrate asymmetry in practice. While the ACCC has yet to receive a single application for formal merger clearance, and while the ACT has not once considered an application for a merger authorisation, the ACCC appears to be busy processing informal clearances, with 19 applications received between 1 January 2009 and 11 March 2009 alone and 166 applications processed in 2008.1

In August 2008, the ACCC announced that in light of its experiences with companies acting 'in bad faith,' it would 'take a tougher stance' on undertakings provided to the ACCC in order to remedy competitive concerns, with the chairman explicitly suggesting that the ACCC might consider altogether 'removing them from [...] consideration.'2

Merger guidelines

The Merger Guidelines 2008 (Guidelines), a comprehensive guidance document outlining the ACCC's substantive analysis of mergers and acquisitions, was published in 2008.3 These Guidelines replace a 1999 document and were build upon a draft published in early 2008. Procedural issues are covered by the ACCC's Formal Merger Review Process Guidelines (for formal clearances) and Merger Review Process Guidelines (for informal clearances). The Guidelines are not legally binding but reflect the practice of the ACCC, and they will likely be the first resource for parties to a potential concentration and their counsel.

The new Guidelines closely resemble the earlier draft. Both unilateral and coordinated effects theories are recognised, and the ACCC will consider a wide range of 'merger factors' (eg, market share, market concentration, availability of substitutes, barriers to entry, vertical integration) when making its assessment. Remedial undertakings are addressed in an annex. Major changes from the 1999 Guidelines include removal of 'safe harbour' thresholds based on market share and addition of an advisory notification threshold. While notification of a transaction is not mandatory in Australia, parties to a transaction are 'encouraged' to notify the ACCC 'well in advance' of completion if: the products of the parties are substitutes or complements; and the merged firm would have a post-merger market share of more than 20 per cent in one or more relevant markets.4

Enforcement activity

In February 2008 the ACCC announced its decision to oppose the proposed acquisition of certain assets of Carter Holt Harvey by Sumitomo Forestry Company Limited. The merger would have increased the HHI in the market for the manufacture and supply of raw medium density fibreboard by approximately 2350 to 6050, and the only remaining rival in this market was, in the ACCC's view, unable to provide an effective competitive constraint on the merged firm.5

The ACCC also demonstrated its willingness to enforce the merger control laws on a smaller scale when it opposed the acquisition of a single supermarket by Woolworths Limited, Australia's largest grocery retailer, in Karabar (a suburb of Queanbeyan, New South Wales). The ACCC concluded in a decision announced on 25 June 2008 that, in the absence of the transaction, the supermarket would have been acquired by the competing Supabarn Group and expanded and upgraded, leading to 'higher levels of competitive tension between the Karabar supermarket and the other supermarkets in Queanbeyan and Jerrabomberra'.6

Revised foreign investment policy

The Australian government released a revised policy on foreign investment in April 2008. The policy provides guidance on the government's exercise of its powers under the Foreign Acquisitions and Takeovers Act 1975 (FATA) to block proposed foreign purchases of Australian businesses and real estate. A detailed summary of the policy, and of the criteria used to assess whether a proposed transaction should be notified to the government for prior approval under the FATA, may be found online.7


China's merger control regime came into effect in 2008, and new guidance documents have begun to build on the framework provided by the core legislation. With only two published decisions to date, however, it is hard to predict the road ahead for Chinese merger control. Additional guidelines and regulations are expected in the coming months. These should bring increased clarity to the practice of an emerging merger control regime of great importance.

New merger control regime

China's Antimonopoly Law (AML) took effect on 1 August 2008. Chapter IV (articles 20-31) of the AML contains the core merger-control provisions.8 Additional regulations and guidance texts have been issued to address notification thresholds, procedural matters and notification submissions.

The merger control provisions apply to full mergers and to acquisitions of control or the 'possibility of exercising decisive influence' over other 'business operators'. These terms are not defined in the legislation.9 The AML's merger control regime is written to apply in the same manner to domestic and foreign companies. The Ministry of Commerce (MOFCOM) is now responsible for all merger reviews, and the State Administration for Industry and Commerce (SAIC) has been relieved of its merger control jurisdiction.

If the notification thresholds are met, the parties must notify the concentration to MOFCOM and must suspend the implementation of their transaction until clearance has been received.10 The thresholds, promulgated by regulation on 3 August 2008, require that both (or at least two) parties to the transaction have activities in China. In particular, the thresholds are met if:

  • in the previous financial year, the global turnover of all parties exceeds 10 billion renminbi (approximately US$1.46 billion) and the turnover in China of each of at least two parties exceeds 400 million renminbi (approximately US$58.5 million); or
  • in the previous financial year, the turnover in China of all parties exceeds 2 billion renminbi (approximately US$292.8 million) and the turnover in China of each of at least two parties exceeds 400 million renminbi (approximately US$58.5 million).11

MOFCOM may assess a merger that falls below these thresholds if it believes that the merger may have the effect of restricting or eliminating competition.12 The deadline for MOFCOM's decision is 30 days from 'complete notification,' unless a 'further review' is initiated; the 'further review' period is an additional 90 days and may be extended up to 150 days under certain circumstances.13 MOFCOM's discretion in assessing 'completeness' of a notification introduces an unpredictable element into the merger review timeline.14 During the review period, MOFCOM may prohibit a concentration or impose 'restrictive conditions' on clearance; any such decision must be published.15 The expiration of a review period without a decision leads to a deemed clearance.16

Relevant factors in merger review include in particular: market share; market concentration; the effect of the transaction on market access and 'technological progress'; the effect of the transaction on consumers and 'other business operators'; and the effect of the transaction on 'national economic development.'17 National security will also be considered where relevant.18 Any 'positive impact' arising from the transaction will be assessed by MOFCOM as part of the merger review process.19

The Working Guidelines on Antimonopoly Reviews for Concentrations of Business Operators, promulgated on 1 January 2009, offer a very broad overview of procedural issues in merger review. The Guiding Opinion on Reporting of Concentrations of Business Operators of 5 January 2009 provides additional detail regarding the parties' obligations and rights regarding the notification of a merger.

Implementation of a concentration in violation of the AML may result in a fine of up to 500,000 renminbi; MOFCOM may require that the concentration be unwound by mandating the disposal of shares or assets, the transfer of the business or 'other necessary measures.'20

Enforcement activity

Two merger control decisions have been published to date by MOFCOM.21 The first decision, published on 18 November 2008, concerned the acquisition by InBev of Anheuser-Busch. MOFCOM imposed three conditions on its clearance decision, which was issued during the 30-day initial review period. First, InBev was required not to increase its existing shareholdings in the number two and number four breweries in China (in which the merged firm would hold 27 per cent and 29 per cent, respectively). Second, InBev was obliged to refrain from acquiring interests in the number one and number three breweries in China. Finally, InBev undertook the obligation to inform MOFCOM of any changes in its own controlling parties.

The second decision concerned the proposed acquisition of Huiyuan Juice by Coca-Cola, which was prohibited by MOFCOM on 18 March 2009.22 The decision appears to have turned on three anti-competitive effects: the risk that Coca-Cola's dominant position on carbonated drink markets could be leveraged to generate exclusionary anti-competitive effects on the fruit juice market; the barriers to entry presented by the (potential) merged firm's control of two strong fruit juice brand names (Minute Maid and Huiyuan); and the increased difficulties that would be faced by smaller domestic firms following the acquisition. This decision will be carefully analysed by practitioners in an attempt to determine the extent to which it may be indicative of future MOFCOM practice.


In 2008, an important amendment was submitted to the Japanese legislature. The amendment would streamline Japan's merger control laws and further harmonise them with other leading jurisdictions.

Antimonopoly Act Amendment Bill

On 11 March 2008 the Antimonopoly Act Amendment Bill (Bill) was submitted to the Diet by the Cabinet of the JFTC. The Bill included a number of important proposed amendments to Japan's merger control law. The JFTC has provided an English-language summary of the amendment online.23

Perhaps the most important proposed change in the Bill is the introduction of a pre-merger notification system for acquisitions of securities, replacing the current post-implementation notification requirement. The thresholds for the filing of share acquisitions are also simplified, with notification required when an acquirer's shareholding exceeds 20 per cent or 50 per cent. Another significant amendment is the revision of existing notification thresholds, including a shift from an asset-based test to a sales-based test that focuses exclusively on turnover within Japan (including exports to Japan) and harmonises the treatment of Japanese and non-Japanese companies.

The Bill also provides for the adoption of a 'corporate group' principle for the purposes of the application of the notification thresholds, and the introduction of an exemption from the notification obligation of mergers and acquisitions within a corporate group. Finally, the Bill proposes that the scope of application of the merger control system be broadened to include partnerships and funds as well as corporations. Only corporations are covered by the current regime.


The Korean Monopoly Regulation and Fair Trade Act (MRFTA) continues to undergo fine-tuning and adjustment, with the Enforcement Decree amended to raise the notification threshold, and a proposal to amend the law itself currently under consideration by the Korean National Assembly. The KFTC remains an active and innovative enforcer of the merger laws.

Amendment of Enforcement Decree of MRFTA

The Enforcement Decree of the MRFTA was amended on 1 July 2008, significantly raising the notification threshold. Under the previous law, notification was required if one party to a business combination had assets or sales in excess of 100 billion Korean won and the other had assets or sales in excess of 20 billion Korean won (overseas acquisitions are subject to a further threshold reflecting Korean activity). The amendment raises the first threshold to 200 billion Korean won.

Proposed amendment of MRFTA

On 6 July 2008 a proposed amendment of the MRFTA was submitted to the Korean legislature. The amendment would, among other things, abolish the 30-day deadline for pre-merger notification of combinations involving companies with assets or sales in excess of 2 trillion Korean won.

Enforcement activity

In a newsletter dated 4 July 2008, the KFTC provided important insight into 2007 merger activity, noting for example that slightly over 58 per cent of mergers and acquisitions took place in service industries.24

In September 2008 the KFTC imposed conditions on a merger between Home Plus and Home Ever. Significant conditions were imposed on five stores: first, a price-hold order requiring that the price of certain key products be maintained (at a level below the national average price for such products); second, the introduction of an 'unbeatable price system' for all products, described by the KFTC as '[a] system wherein a consumer reporting that the product price of store A is higher than the price of the same product at store B should be compensated by the store in an amount double the price difference.' The merger analysis in this case was also noteworthy for its use of the 'purchase conversion rate.' As the KFTC explains, '[t]he anti-competitive effects are determined by checking the purchase conversion rate to the acquiring company from the customers of the acquired company [...] (for example, when a customer asks where the substitute store is when Home Ever closes its business; if the ratio of Home plus is high, anti-competitive effects are judged to exist).'25

Finally, eBay's acquisition of G Market was conditionally approved on 24 September 2008. The decision to clear the transaction - even though the merged firm had a 87.2 per cent market share in circumstances in which 'the possibility of cartel activities was suspected' and 'there seemed to be the possibility of price raises' - appeared to rest on the low barriers to entry which, the KFTC found, characterised the relevant market. While the full text of the decision is not available online, a detailed summary in the KFTC newsletter indicates that 'the approval condition may change if the economical condition changes after 1 January 2011.'26

New Zealand

In 2008, New Zealand's Commerce Act was amended to strengthen the effectiveness of conditions imposed on merging parties, new procedural guidelines were introduced and important litigation regarding accessory liability in the merger control context reached a conclusion.

Commerce Amendment Act of 2008

While the Commerce Amendment Act of 200827 does not amend part 3 of the Commerce Act, which deals with business acquisitions, the new sections 69AB, 69AC and 85A-85C of the Commerce Act significantly affect merger remedies.28 Section 69AB provides that a merger authorisation or clearance is void if an undertaking relating to the acquistion in question is contravened. Section 69AC makes provision for the variation of undertakings given to the Commerce Commission. Section 85A provides for penalties for contravening an undertaking, attempting to contravene an undertaking, or engaging in related conduct: these penalties may not exceed NZ$500,000 for each act or omission. Section 85B enables the court to order divestiture of assets or shares in response to a contravention of an undertaking. In applying sections 85A and 85B, the court is prohibited by section 85C from considering whether it was appropriate for the Commission to accept the undertaking in question, whether the undertaking or any of its terms are still necessary or desirable, or the competitive effects of the breach of the undertaking in question.

Clearance Process Guidelines

In November 2008, the Clearance Process Guidelines (Guidelines) were published. These Guidelines are designed to assist companies with making voluntary filings for clearance of a proposed concentration by the Commerce Commission.29 The Guidelines offer a comprehensive introduction to and summary of the merger process, including: time limits; the information-gathering process; confidentiality; key stages in the review process (eg, statement of preliminary issues); the publication of decisions; and the parties' rights of appeal and review.

Enforcement activity

The Commerce Commission's 2007/2008 Annual Report provided the Commerce Commission with an opportunity to review its own merger enforcement record. For the year 2007/2008 the Commission considered 26 applications, clearing 24 (including five conditional clearances) and declining to clear two.30 In 2008 but subsequent to the publication of the Annual Report, the Commission also declined to clear two more acquisitions.

On 6 June 2008, the Court of Appeal gave judgment in an important case that originated with the Commission's prohibition of the acquisition by NZ Bus Limited (NZ Bus) of the 74 per cent of Mana Coach Services (Mana) that it did not already own. While the Court of Appeal held that the proposed acquisition would indeed have been anti-competitive, it nevertheless overturned the High Court's finding of accessory liability regarding both the parent company of NZ Bus and certain sellers of shares in Mana.31 The Supreme Court denied the Commerce Commission leave to appeal from this decision on 19 September 2008.


Singapore's merger control regime has been active since 1 July 2007 and early signs are that the merger control procedures are functioning efficiently. The Competition Commission of Singapore (CCS) operates a voluntary notification scheme. At the time of writing, 13 mergers have been reviewed by the CCS since July 2007; of these, 12 have been cleared, and one review is still pending.


The Asia-Pacific region has seen a range of substantive and procedural changes in merger control during 2008. The true significance of these changes in law and policy will become clear only following their further application, as governments and private enterprises adjust to uncertain times.


* The author gratefully acknowledges the assistance of his colleague Daniel Francis in the preparation of this article.

  1. See www.accc.gov.au/content/index.phtml/itemId/750991 (formal and informal clearances); www.accc.gov.au/content/index.phtml/itemId/774397 (authorisations).
  2. See www.accc.gov.au/content/index.phtml/itemId/840325.
  3. See www.accc.gov.au/content/index.phtml/itemId/809866.
  4. ACCC, Merger Guidelines 2008, pp8-9.
  5. www.acc.gov.au/content/index.phtml/itemId/811679.
  6. www.acc.gov.au/content/index.phtml/itemId/833138.
  7. www.firb.gov.au/content/_downloads/General_policy_summary_april_2008.pdf.
  8. This article uses the English translation provided by MOFCOM online at http://english.mofcom.gov.cn/aarticle/policyrelease/announcement/200712/20071205277972.html.
  9. Article 20, AML.
  10. Article 21, AML.
  11. State Council Regulations on Thresholds for Notification of the Concentration of Undertakings, section 3. Exception is made for companies which are part of the same corporate group. See article 22, AML.
  12. State Council Regulations on Thresholds for Notification of the Concentration of Undertakings, section 4.
  13. Articles 25 and 26, AML.
  14. See article 23, AML.
  15. Articles 28-30, AML.
  16. Articles 25 and 26, AML.
  17. Article 27, AML.
  18. Article 31, AML.
  19. Article 28, AML.
  20. Article 48, AML.
  21. All other decisions to date are believed to have been unconditional clearances. Unconditional clearances need not be published. See article 30, AML.
  22. See http://fldj.mofcom.gov.cn/aarticle/ztxx/200903/20090306108494.html.
  23. See www.jftc.go.jp/e-page/pressreleases/2008/March/0803112.pdf.
  24. KFTC Newsletter, Issue 8.
  25. KFTC Newsletter, Issue 9.
  26. KFTC Newsletter, Issue 9.
  27. This Act was signed into law on 16 September 2008.
  28. The text of the amending legislation is available at www.legislation.govt.nz/act/public/2008/0070/latest/DLM1194512.html.
  29. See www.comcom.govt.nz/businesscompetition/mergersacquisitions/clearanceprocessguidelines/clearanceprocessguidelines.aspx.
  30. Commerce Commission Annual Report 2007/2008, p12. The Report is available online at www.comcom.govt.nz/Publications/annualreports.aspx.
  31. www.comcom.govt.nz/businesscompetition/mergersacquisitions/courtofappealconfirmsnzbusacquisit.aspx.

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