专家点评| 2014 CHINA ANTI-MONOPOLY SEMI-ANNUAL REPORT
The antitrust enforcement in China has surpassed the infant phase and is rapidly developing towards a deeper level and diverse areas, and the enforcement against cartels, abuse of dominant position and ex ante control on concentrations are all involved.
The international tendency coexists with Chinese characteristics in the antitrust regime of China. On one hand, the antitrust enforcement in China is increasingly in line with international practice, for example, the antitrust enforcement agencies of China sometimes commence follow-up investigations on cases that have been investigated in other jurisdictions. On the other hand, the antitrust enforcement agencies are independent of their counterparts in other jurisdictions. The fact that MOFCOM’s decisions on specific cases are often different from those in other jurisdictions is good evidence.
The technicality feature inherent in the antitrust enforcement becomes highlighted, e.g. expert witnesses’ appearance in private antitrust litigations, economists’ active role in the antitrust enforcement of not only MOFCOM, but also the NDRC and SAIC.
Transparency is enhanced further in the antitrust enforcement of China. MOFCOM’s decision to publish the penalty on unnotified concentrations and the live telecast on the Qihoo case in the Supreme Court are both good instances.
专家点评| 2014 CHINA ANTI-MONOPOLY SEMI-ANNUAL REPORT （2）
Baxter’s Acquisition of Gambro4
MOFCOM imposed both structural and behavioral remedies on this deal.
The structural remedy imposed by MOFCOM is identical with that under EU’s conditional clearance, while the behavioral remedy is an addition.
MOFCOM employed the approach of “HHI Index” in its competitive assessment.
Although the relevant geographic market is defined as worldwide, MOFCOM also carefully examined the effects that this deal may have on Chinese market.
Facts
On 8 August 2013, MOFCOM published its third conditional clearance decision in 2013, which is on the proposed acquisition of Swedish dialysis equipment manufacturer Gambro AB (“Gambro”) by its US rival healthcare company Baxter (“Baxter”).
It is also the 19th conditional approval since the implementation of the Anti-monopoly Law in August 2008.
In the MOFCOM decision, the markets for continuous renal placement therapy (CRRT) products and haemodialysis (HD) products are defined as the relevant product markets, and the geographic market is defined as global market. Meanwhile, the impact on Chinese market was also carefully examined by MOFCOM.
After thorough assessment, MOFCOM probed potential anti-competitive effects that this deal may produce. First, High concentration (high HHI ex ante/ex post the concentration) led by this deal implicates potential damages to competition landscape of the relevant market. Second, by reviewing the parties’ market share, MOFCOM concluded that Baxter would gain a dominant market position for CRRT products after the merger since the transaction would eliminate a main competitor of Baxter. Third, MOFCOM maintained that the continued existence of OEM agreements would facilitate potential coordination between Baxter and Niplo. Forth, the transaction poses great difficulties for new entry of enterprises into relevant markets.
Remedies
After several rounds of consultations, MOFCOM accepted the notifying parties’ remedy proposal and decided to approve the transaction on the following conditions:
Baxter shall divest its worldwide CRRT business, including tangible and intangible assets necessary to ensure the survival and competing ability of the divested business.Baxter shall terminate the agreement of OEM production with Niploas as far as it is relevant to Chinese market.
MediaTek’s Acquisition of MStar5
The parties withdrew the filing near the end of phase III and refiled with MOFCOM shortly.The parties are required to submit detailed operation plan within three months after the clear decision and the transaction can only be closed after detailed operation plan is approved by MOFCOM.
Based on the rules from MOFCOM, the parties provided the detailed operation plan within three months which was approved by MOFCOM eventually.
Facts
On 27 August 2013, MOFCOM announced its fourth conditional clearance in 2013, which is on MediaTek Inc’s (“MediaTek”) acquisition of MStar Semiconductor Inc (“MStar”). In this case, MOFCOM defined the market for LCD TV control chips as the relevant product market. Meanwhile, MOFCOM considered the LCD TV control chip market having global characteristics while recognized the uniqueness of the Chinese market. Therefore, Chinese market is the emphasis of MOFCOM’s analysis and assessment in this case.
Through careful assessment, MOFCOM have competitive concerns in 4 aspects as follows. First, the transaction will materially change the market structure by lifting the HHI in the Chinese LCD TV control chips market from 4533 to 6500, with an increment of 1962. Second, the notifying parties were top two competitors in the relevant market and they constrained each other in terms of price, service quality and innovation ex ante the transaction. Ex post the concentration, these constraints will not exist anymore. Third, the notifying parties will have a market share in total as high as 61% and 80% in global and Chinese market respectively, hence other competitors can’t effectively compete with MediaTek ex post the transaction. Fourth, the entry barrier would be raised in a further degree.
Despite of weighting potential precompetitive effects that the transaction may lead to, MOFCOM still concluded that the concentration would have effects of restricting or eliminating competition on the relevant markets in the short term.
Remedies
The following conditions were imposed on this deal by MOFCOM:
MStar’s Taiwan subsidiary (“MStar Taiwan“) should take over MStar’s LCD TV control chips business, and MStar Taiwan should continue staying in the market as an independent entity.
MediaTek’s shareholder rights should be limited to dividends, financial report consolidation and conditional appointment of board members. The exercise of other rights is subject to prior approval of MOFCOM.
MediaTek and MStar Taiwan should not conduct business cooperation without prior approval of MOFCOM, and should set forth measures to avoid information exchange on both employee and management level. MediaTek and MStar Taiwan should maintain their pre-transaction practices on supply, after-sale services and open code, etc. as before.
MediaTek and MStar Taiwan should not acquire any competitor in the LCD TV control chip market in the absence of MOFCOM’s prior approval.
The initial period of the remedies is three years. Within this period, MediaTek and MStar Taiwan should submit written report to MOFCOM on the fulfillment of the above-mentioned obligations every three months. After the three-year period, MediaTek and MStar Taiwan may apply for removal of the hold-separate obligations.
Themo Fisher’s Acquisition of Life Technologies6
MOFCOM engaged third party economic consultants to assist with its economic analysis.
MOFCOM’s employed the approaches of “HHI Index” and “indicative price increase tests” in its economic analysis.
MOFCOM imposed both structural and behavioral remedies on this deal
Facts
On 14 January 2014, MOFCOM conditionally approved Thermo Fisher Scientific Inc.’s (“Thermo Fisher”) acquisition of Life Technologies Corporation (“Life Technologies”), after reached the conclusion that the proposed deal may have the effect of eliminating and restricting competition in markets for cell culture products, SSP kits, SDS-PAGE protein standards and siRNA reagents. In market definition, MOFCOM identified 59 relevant product markets based on demand and supply substitutability analysis. With regard to the relevant geographic market, MOFCOM believed that two of the product markets, Australian/New Zealand HyClone and siRNA reagent, are global and for other 57 product markets, the relevant geographic market was China. MOFCOM conducted spot visits and engaged a third party economic consultancy to assist with its economic analysis on top of consultations with relevant governmental agencies, industry associations and relevant third parties as before. Through comprehensive analysis, MOFCOM’s focused on market concentration levels and post-merger estimates of potential price increases, and identified competition concerns in four markets: the markets for cell culture products, SSP kits, SDS-PAGE protein standards, and siRNA reagents.
Remedies
MOFCOM cleared the concentration subject to the conditions:
Themo Fisher shall divest its global cell culture business, including tangible and intangible assets required to maintain the viability, marketability and competitiveness of the business.
Themo Fisher shall sell its 51% interest in Lanzhou Minhai Bioengineering Co., Ltd. in China.
Themo Fisher shall divest its global gene modulation business, including tangible and intangible assets required to maintain the viability, marketability and competitiveness of the business.
Themo fisher shall reduce the catalogue prices for SSP kits and SDS-PAGE protein standards by 1% every year for the next 10 years, and shall not reduce the discounts offered to Chinese distributors.
Themo fisher shall supply SSP kits and SDS-PAGE protein standards to third parties on an OEM basis or based on a perpetual and non-exclusive license for the next 10 years.
Microsoft’s Acquisition of Nokia
The US Department of Justice (“DOJ”) and European Commission (“the Commission”) cleared this deal without any conditions.
Neither the DOJ nor the EU Commission but MOFCOM speculated on the likely post-merger licensing conduct of the merging parties.
FRAND obligations are imposed by MOFCOM as conditions.
Facts
On 8 April 2014, MOFCOM approved Microsoft Corporation’s (“Microsoft”) acquisition of the bulk of devices and services business of Nokia Corporation of Finland (“Nokia”) subject to conditions that involve an intellectual property issue. Based on thorough analysis, MOFCOM found that Microsoft’s acquisition of Nokia’s design and services business had the effect of eliminating or restricting competition in China’s smart phone market. Although neither the DOJ nor the EC Commission predicted on the likely post-merger licensing conduct of the merging parties, MOFCOM speculated the parties’ motives in Contrast. According to MOFCOM, for one thing, Microsoft “could” exclude and impede competition in China’s smart phone market based on its patents for Android: “Microsoft has the motive to raise royalty fees”; for another, Nokia “could abuse its reserve of patent licenses” (“the acquisition enhances Nokia’s motive to rely on profits from patent licensing”).
Remedies
After rounds of negotiation, MOFCOM cleared this deal with remedies. Considering conditions imposed in this case is lengthy, please refer to the full text of remedies in the following link:
http://fldj.mofcom.gov.cn/article/ztxx/201404/20140400542415.shtml
Merck’s Acquisition of AZ Electronics
MOFCOM’s review process took only around two months since the case was officially accepted.
MOFCOM itself engaged an independent third party consulting firm to provide economic analysis.
Neither horizontal overlap nor vertical overlap existed in this deal.
Facts
Following the antitrust watchdog in Germany, Japan, Taiwan and the United States, MOFCOM conditionally cleared Merck KGaA’s (“Merck”) acquisition of AZ Electronic Materials S.A. (“AZ Electronics”) on April 30, 2014. According to the notice, the relevant product market for this concentration is defined as two markets, the crystal liquid market and the photoresist market, and the relevant geographic market is global market. MOFCOM undertook a thorough assessment on various factors including market share, market power and market entry. The authority also consulted the economic analysis provided by an independent third party consulting firm and the industry surveys. Drawing upon the foregoing information, MOFCOM reached a conclusion that Merck’s acquisition of AZ Electronics is likely to enable Merck to tie the sales of crystal liquid with photoresist, or conduct cross-subsidy between two products, to the detrimental of market competition. Remedies After rounds of negotiations, Merck’s commitment offered on April 25, 2014 was considered sufficient to remove MOFCOM’s competition concerns. MOFCOM cleared the deal by imposing several conditions as below:
Merck shall not conduct tying sales of any form to directly or indirectly force Chinese clients to purchase Merck’s crystal liquid and AZ Electronics’ photoresist at the same time, including not conducting cross-subsidy of any form between Merck’s crystal liquid and AZ Electronics’ photoresists.
Merck’s licensing of crystal liquid patents shall be based on non-exclusive and non-sublicense principles. The licensing terms should also comply with commercially reasonable and non-discriminatory principles.
Merck shall report the fulfillment of the above-mentioned obligations to MOFCOM every half year. Anytime Merck plans to conclude any licensing agreement related to crystal liquid patents in China, it shall notify MOFCOM in advance.
The period for the said obligations is three years, from the announcement date of the decision until April 30, 2017.
Outlook
August 2014 will mark the sixth anniversary of implementation of the AML. It has seen a fact that MOFCOM’s merger control enforcement is gradually maturing and MOFCOM is playing a positive and indispensible role in maintaining competitive market order.
The cooperation between MOFCOM and anti-trust agencies in the other jurisdictions has become more wide than before, regarding both education, research and the information exchange.
It is forecasted that MOFCOM will continue to proceed with supporting legislation in the second half of 2014 and 2015 and make their review process more transparent. Moreover, MOFCOM will gradually institutionalize its enforcement in two areas, review of simple cases and imposition of remedies. It is also predicted that MOFCOM’s enforcement on unnotified concentrations will be strengthened in a further degree. On top of the above-mentioned, we estimate that the techniques and approaches employed by MOFCOM in its review process will be increasingly diverse and advanced.
The original Chinese notice published by AJ Dr. Zhan Hao.
Dr. Zhan Hao is the partner of AnJie Law Firm and received his Doctoral degree, Master degree and Bachelor degree in law. Dr. Zhan also conducted the Post-doctoral research on Microeconomics.
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