The Anti-monopoly Scrutiny On Merger And Acquisition

This dissertation, by virtue of comparative law methodology, attempts to study and analyze the leading, precedent cases as well as the practice of enforcement agencies subject to the statutory, case laws of the United States and European Union for the purpose of providing some conducive reference to the interpretation and application of the relevant terms and legal norms of the Anti-monopoly Law of the Peoples’Republic of China. There is no doubt about the sophisticated legislation of the Anti-monopoly Law of China even though, as matter of fact, it has followed & transplanted, to large extent, a number of statutory rules and provisions from the U.S and the EU. However, it’s worthy to be noted that as an economic legislation, the anti-monopoly law depends greatly on the developed market economy. As the integral part of economic basis, the mechanism of competition of the market and its appraisal system are the prerequisite to safeguard the perfect competition and operation, which is to be implemented as the ultimate aim and target of the antitrust law. It has been well known world wide that the significance of transplant of law. As one of such means to introduce some of the terms and norms from the U.S. and EU legislations into China anti-monopoly law, it shall be unquestionable by all means. But the reality is unavoidable, i.e. whether or not the current socialist market economy mechanism is in consistency with the advanced and abstract legal rules. Just as advocated by Karl Marx, the superstructure depends on the economic foundation and the latter is to interact with the former. Being part of the superstructure, in the absence of perfect market economic basis, the relevant economic theories as well as no precedent case to follow, how the enforcement agency of the State Council of the Peoples’Republic of China implement the scrutiny of anti-monopoly remains the top core of this dissertation. Furthermore, with a view of protection of "the industries in relation to national economic lifeblood, national security and the industries to which exclusive operation and sale are implemented subject to law with their dominance in terms of the state-owned economy ", how can the Anti-monopoly Law of China materialize the mission of " preventing & prohibiting monopoly conduct, protecting the market for competition, increasing efficiency of economic operation, safeguarding the interest of consumers and public interests, and enhancing sound development of the socialist market economy " in case no specific criteria is available to adopt in the scrutiny of anti-monopoly? With such in mind, the author determined to make thorough study, with comparative approach, on the exampling of some decisions made by the enforcement Agency of China with integration of fundamental jurisprudence, relevant definitions and the conditions of application etc in the field of anti-monopoly laws. Hereunder this dissertation is to be divided into five chapters to make analysis respectively in detail.Chapter 1. Legal Frame Governing Merger and Acquisition in ChinaIn this Chapter, the basic definition and type of the merger and acquisition have been classified in accordance with the positive laws in China as well as some doctrines from different jurisdictions, which are to be intended to lay a solid theoretical foundation for the entire analysis hereunder.Chapter 2. The Definition and Classification of Relevant MarketInter alia, as one of the fundamental concepts in the doctrine of antitrust law, the relevant market is the pre-condition to assess the outcome of competition. Where the relevant market is defined, i.e. within the specific products market and the geographic market, the impact created by the merger can be appraised whether or not it creates restraint or impedes the outcome of competition as illegal test to which the anti-monopoly law shall be applied accordingly. Hence, analysis of the related economic theory in the Western Countries and its adoption as part rules of law in the precedent case will undoubtedly provide a visual picture for the application of the abstract legal rules.Chapter 3. Non-competition ClauseIn general, the ultimate target of the mergers by the undertakings is to maximize the profit by consolidation of the resources and strengthen the market power for completion. Therefore in order to achieve such goal, it’s essential to take any measures, including not limited to the chief means of consolidation or conspiracy in view of non-competition between the mergers, to strike other competitors. The statutory anti-trust law for the first time was passed in the United States against such kind of anticompetitive behavior. With respect to the rationale and legitimacy, a package of principles and application conditions has been established by enforcement agencies and the courts with which the procedural measurements and substantial criteria had been constituted eventually. In comparison with the qualitative rules to illustrate explicit monopolistic agreement which is prohibited by the Anti-monopoly Law of China, it seems that the package of principles and guidelines reformulated in the U.S. and EU are becoming more pertinent& operable, which is deemed as supplementary to improve the stagnated statutory code. As consequence, it may, to some extent, provide some conducive reference to the Chinese relevant authorities to prepare for either the guidelines or the judicial interpretation in case of need.Chapter 4. The Failing Company Defense on Merger and AcquisitionThe Failing Company Defense was established in the precedent case in the United States, which might be granted exemption from the antitrust review subject to given conditions of bankruptcy. Obviously comparing with the intended tendency to rather protect the dominant state-owned enterprises, the developed countries seem to focus more preferably on maintaining the perfect competition order so as to improve the efficiency and promote the economic development. Therefore upon citation of failing company defense by the mergers, the prudent caution shall be given duly. Irrespective of the due consideration was granted by the court, within its discretion, to the equity of weighing the shareholders, creditors and employment surrounding local community while affirming such defense, the enforcement Agency in the United States would rather construe all the pre-conditions in a strict way while taking a whole consideration of protection of the competition other than damage the competition by the proposed merger. Up to date, such kind of mechanism is not established. In view of the existing loophole in the legislation, it’s of great significance to study this deeply.Chapter 5. Conflict between Foreign Trade Control and Foreign Antitrust LawChina is also one of the Contracting Parties to the WTO as other leading economic communities. Pursuant to the public international law and WTO rules and protocols, the Member State is obliged to open its market and liberalize trade competition subject to the commitment made. Ironically as a paradox, in the absence of unified international competition law, most of the Member States including China extend extra-territory application of domestic antitrust law to the international cartels, cross border mergers and other conduct of foreign trade control, which may create anticompetitive outcome. As result of the extra-territory application, the conflicts of laws will inevitably take place. Evidently, the strategy of win-win supposed to be the best option in case China is able to attach more foreign investment by avoiding or lessening the conflicts while maintaining the perfect competition in the domestic market through drawing lesson from the various jurisdictions. With more and more Chinese enterprises going abroad to engage in merger and acquisition, the importance of guidance on the examination of antitrust in foreign countries are becoming increasingly recognized by the enterprisersChapter 6. The Antitrust Scrutiny and National Security on Merger and AcquisitionThe review of national security was created in the United States upon approval of particular Act against the foreign merger with its domestic undertakings, which is different from the anti-trust review. Whereas it’s also hardly to find a clause of national security scrutiny upon the proposed merger by the foreign investors. As it’s well known that the concept of national security is too broad to be defined by the law. Without definition, by shadow of ideology, it does make the inherent foreseeability and transparency of the law to become ambiguous, which has been criticized & complained by many foreign investors. In consideration to the current status, the State Council of the PRC promulgated the latest Notice concerning the setup of the system of security review of the merger of the domestic enterprise by the foreign investors in which the Joint Conference of Intra-Minitries was established to implement the examination subject to the stipulated sphere, contents, mechanism and procedures. Other than complaint, the due recognition has to be given to this administrative regulation. At least, it enhanced the transparency of rule of law in China particularly for proposed merger by foreign investors.