China's Antitrust Rules

Will Carry a Limited Scope

By ANDREW BATSON

Wall Street Journal

August 5, 2008; Page A8

BEIJING -- The release of long-awaited rules on the working of China's new antitrust law should ease worries that it could affect many global deals with only a tangential link to the country.

Monday, the government published rules specifying which proposed mergers need to be submitted to Chinese authorities for approval, with trigger points for notification set higher than in earlier drafts.

Under the rules, proposed deals would need to be reported if the participating companies would have combined world-wide annual revenue of more than 10 billion yuan, or about $1.5 billion at current exchange rates, and at least two of the participants each have China revenue of more than 400 million yuan.

Notification also is required of any merger deal involving companies with combined annual China revenue exceeding two billion yuan, as long as at least two parties each have more than 400 million yuan in China revenue.

Those thresholds mean the reach of the notification requirement won't be as wide or as onerous as some lawyers had initially thought. "The large majority of overseas transactions that have little impact on the Chinese market would be exempted from filing," said Jun Wei, a lawyer with Hogan & Hartson LLP in Beijing.

The final version of the notification requirements is significantly shorter and simpler than a draft published for comment in March. The rules also drop language -- present in previous drafts -- that would have required merger notification from companies with a specified market share. Lawyers had criticized the provision as impracticably vague because it is possible to define an individual market in many different ways.

The changes between the draft and the final version of the regulations appear to reflect intensive discussions between Chinese officials and the international antitrust community. Foreign chambers of commerce, lawyers' groups and government bodies have shared their experiences and made suggestions to China over the many years it has taken to draft the antitrust legislation, which was passed last year and came into effect last week.

The measures were approved by a State Council meeting Friday, the day the Antimonopoly Law took effect, and were published on government Web sites Monday. The merger-notification thresholds are just one of many sets of regulations that authorities are expected to issue in coming months to clarify technical points in the law.

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