China has raised the turnover threshold for merger control filing, as per the latest announcement by the Chinese State Council. The new rule, effective from January 22, 2024, mandates that mergers must be filed with the Anti-monopoly Bureau under the State Administration for Market Regulation (SAMR) for review if they meet certain turnover conditions.
The combined global turnover of all merging firms must exceed RMB 12 billion, up from the previous RMB 10 billion. Additionally, at least two of these firms must each have a turnover within China exceeding RMB 800 million, doubled from the previous RMB 400 million.
Alternatively, if the combined turnover within China for all merging firms exceeds RMB 4 billion, doubled from RMB 2 billion, and at least two firms each have a turnover within China over RMB 800 million, a filing is necessary.
This is the first change to the turnover threshold since 2008. It aligns with the new China anti-monopoly law (AML) and is designed to balance regulation of transactions that could lessen competition with the need to reduce the compliance burden on corporations. The new law also empowers SAMR to order a filing for transactions with anti-competitive impact, even if they fall below the threshold. This is significant in sectors like tech, where firms may strategically accept losses in exchange for market dominance. Penalties for not filing a qualifying deal have been increased to RMB 5 million from RMB 0.5 million. Transactions with anti-competitive effect could incur a penalty amounting to 1-10% of the previous fiscal year's turnover.
Companies with a market share of 15% or more are advised to regularly analyze their sales and expansion strategies to avoid triggering any anti-monopoly obligations or penalties.