ChinaIPToday.com - Tencent, Alibaba, DiDi, Bilibili fined $75,000 for defying pre-merger rules

China’s State Administration for Market Regulation (SAMR), the top market regulator, on July 11 issued administrative orders imposing a fine of 500,000 yuan ($75,000) on each of 15 business undertakings for their failure to notify the government agency of a total of 28 transactions embodied as acquisitions or joint venture partnerships for review in advance of the execution of transaction contracts. Despite pre-acquisition and merger (M&A) control rules, as part of competition law, varying by country, prior notification is mandatory in China, as in the U.S., the EU, and Japan, if thresholds for minimum transaction sizes are met.

The 28 transactions, of which 22 are acquisitions and 6 are joint venture partnerships, are identified as practices of concentration of business undertakings violating the merger control review regime. Tencent Holdings Ltd., Alibaba Group Holding Ltd., Ping An Insurance (Group) Company of China, Ltd., and Shanghai Hode Information Technology Co., Ltd., and SoftBank Group Corp. are among the penalized entities conducting them.

According to Article 20 of the Anti-Monopoly Law (AML) of the People’s Republic of China, concentration of business undertakings refers to (i) the merger of undertakings; (ii) the acquisition by undertakings, whether by purchase of securities or assets, of control of other

undertakings; (iii) the acquisition by contract or any other means, of control of other undertakings or of the ability to exercise decisive influence over other undertakings.

The AML and the Interim Regulations on Reviewing Concentration of Business Undertakings (《经营者集中审查暂行规定》), which became effective in December 2020, don’t expressly mention the creation of a joint venture by two or more undertakings as a type of concentration. In a document not invoked by the SAMR in the July 11 orders titled the Guidelines on Declaring Concentration of Business Undertakings (《关于经营者集中申报的指导意见》 ), Article 4 provides that a joint venture partnership is identified as a type of concentration of business undertakings if two or more creators of the joint venture control it together; otherwise, a joint venture partnership is not identified as such.

According to the amended Regulations on the Thresholds for Declaring Concentration of Business Undertakings (《国务院关于经营者集中申报标准的规定》) enacted by China’s State Council in 2018, the market watchdog shall be notified of a merger or acquisition for review under the AML in terms of turnover on the part of undertakings in the preceding fiscal year: if the combined worldwide turnover of all undertakings concerned surpasses 10 billion yuan ($1.5 billion), and the nationwide turnover within China of at least two undertakings concerned surpasses 400 million yuan ($60 million) each; or if the combined nationwide turnover within China of all undertakings concerned surpasses 2 billion yuan ($300 million), and the nationwide turnover within China of at least two undertakings concerned surpasses 400 million yuan ($60 million) each.

Co-venturer 1: Vibrant Creek Ltd.

Co-venturer 2: Fengbang Financial Leasing (Shanghai) Co., Ltd. (沣邦融资租赁（上海）有限公司)

Transaction closing year: 2018