China Law Update : China Business Law Lawyers & Attorneys : Sheppard Mullin Law Firm : Direct Investment, Dispute Resolution, Intellectual Property, Antitrust, Venture Capital

Since the Anti-Monopoly Law of China (the "AML") came into effect in August 2008, attention has been focused on its enforcement and effect on the Chinese market. While the public doubts the government has motivation in enforcing the law robustly against state-owned giants, individuals and private firms have been actively bringing private actions in court against these business giants. Chongqing Insurance Association, China Mobile, China Netcom, Baidu, Shanda Interactive Entertainment, and Sinopec have been defendants in the first batch of anti-monopoly litigations.

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The website of the Anti-monopoly Bureau of the Ministry of Commerce (“Anti-monopoly Bureau”) has become “the must-see site” for antitrust lawyers practicing in China. See http://fldj.mofcom.gov.cn/. Since the beginning of 2009, the Anti-monopoly Bureau has used the site to announce six drafts of various provisions and guidelines, and two transitional guidelines regarding implementation of a new pre-merger filing system under the Anti-monopoly Law.

Following the announcement of thresholds for pre-merger filing in China, Anti-monopoly Bureau is actively constructing the new pre-merger filing system in compliance with the Anti-monopoly Law and working to clarify vague areas of the new law.
 

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The Provisions on the Takeover of Domestic Enterprises by Foreign Investors ("Old Rule") and the accompanying pre-merger filing system have been in effect for five years.  According to available government statistics, there have been more than 500 pre-merger filings under that regime.  The new Anti-Monopoly Law ("AML") became effective on August 1st, requiring new implementing regulations and thresholds.  MOFCOM is at the end stage of preparing its new Rules on Notification of Concentration by Undertakings ("New Rule") to support the AML, and the new thresholds triggering required pre-merger filings will soon be announced.

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When the world’s largest steel company Arcelor Mittal acquired a 28% stake in steel company China Oriental Group in November 2007, it made no secret of its desire to gain control of China Oriental and aggressively expand into the Chinese market.  That dream, however, became short-lived.  On May 13, 2008, Arcelor dropped its takeover bid of China Oriental after the deal failed to clear the Chinese anti-monopoly authority in the required six months.

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The Anti-Monopoly Law  (“AML”) will come into effect soon and accompany the approaching Beijing Olympics.  As preparation for this highly significant law, the Implementation Rules of the AML (“Implementing Rule”) have been extensively discussed within the anti-monopoly authorities.  These Implementing Rules will be an essential part of implementing and enforcing the AML.  In particular, the Implementing Rules are expected to clearly define several vague clauses of the AML.  Among these vague clauses, the right to file the private anti-monopoly litigation has received substantial attention from many leading multi-national companies in various industries.

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