China to raise revenue bar for declaring concentration of operators

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China to raise revenue bar for declaring concentration of operators

Industry experts said that many of the rules, based on international experience, are expected to improve China's anti-monopoly rules and enforcement. PHOTO VCG The State Administration for Market Regulation, China's top market watchdog, raised the revenue bar for declaring a concentration of operators in a revised draft after another five draft rules and provisions related to anti-monopoly practices were opened to public comment on Monday.

Industry experts said that many of the rules, based on international experience, are expected to improve China's anti-monopoly rules and enforcement, and make fair competition in the marketplace.

According to the draft on the concentration of operators, the country will raise the bar for companies to declare such behavior, from 10 billion yuan and 2 billion yuan to 12 billion yuan and 4 billion yuan, respectively, in terms of global and Chinese turnover.

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One business operator may get control over another, which could lead to a monopolistic or quasi-monopolistic situation. Antitrust authorities in many countries require operators to declare many mergers and acquisitions in advance to prevent potential monopolies.

According to Wang Xianlin, a member of the Anti-monopoly committee, believes that raising the turnover bar will reduce institutional transaction costs and create broad development space for various market players, especially for small and medium-sized enterprises.

The new draft also added the market valuation of an acquiree as a criterion to reflect its market potential and protect the innovation of more market players.

If one of the parties' total annual revenue is over 12 billion yuan $1.79 billion, the companies will need an antitrust review of planned M&As.

Strengthening anti-monopoly supervision over M&As involving large enterprises is a global trend. The United States imposes additional anti-monopoly obligations on enterprises with revenue over $30 billion, said Wang, who is also director of the Center for Competition Law and Policy at Shanghai Jiao Tong University.

China had 727 cases related to the concentration of business operators last year, which was a significant increase over previous years, according to the SAMR.

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Six draft rules and provisions that aim to improve antitrust efforts were opened for public comment on Monday. The proposals include the prevention of the abuse of intellectual property, administrative power and dominant market positions, as well as anti-monopoly agreements.

Antitrust authorities can impose a fine of at least 1 percent, but not more than 10 percent of the company's total sales in the previous year if an operator abuses intellectual property rights to exclude or restrict competition.

Antitrust authorities with limited law enforcement resources can focus on major cases with more detailed antitrust efforts. It will help improve law enforcement efficiency as well. It will eventually lead to a more open and international business climate, said Wei Shilin, deputy director of the Competition Law Committee of the Beijing Intellectual Property Law Research Institute.