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INTERNATIONAL MERGER NOTIFICATION It is not possible in this short article to meaningfully survey all of the global merger notification regimes. However, the notification regimes in China, Brazil, India and a new African supranational competition authority discussed below provide a sense of the regulatory issues that must be managed in a multi-national transaction and the types of issues that arise. (We focus here on the mandatory approval or notification requirements, but it should be recognized that, in many jurisdictions, including Canada, mergers below the notification threshold can still be challenged if the relevant competition authority learns of the transaction and determines that it is likely to significantly prevent or lessen competition.) CHINA China enacted a merger review regime in 2009. As described below, while the thresholds for mandatory notification are relatively high, a number of mergers subject to the regime have been subjected to lengthy reviews and delays in closing. The Ministry of Commerce (MOFCOM) administers merger reviews under the Chinese AntiMonopoly Law. Notification Thresholds Under the Anti-Monopoly Law, parties to a "concentration" that meets prescribed financial thresholds must file a pre-merger notification with MOFCOM and obtain MOFCOM approval prior to implementing the proposed merger. Specifically, a notification is required if either of the following financial thresholds is met: • in the previous fiscal year, the worldwide "turnover" (i.e., annual sales) of all parties to the transaction, including their affiliates, was at least RMB 10 billion (approximately C$1.6 billion) and the Chinese turnover of each of at least two parties, including their affiliates, was at least RMB 400 million (approximately C$65 million); or • in the previous fiscal year, the combined Chinese turnover of all parties to the transaction, including their affiliates, was at least RMB 2 billion (approximately C$325 million) and the Chinese turnover of each of at least two parties, including their affiliates, was at least RMB 400 million (approximately C$65 million). Accordingly, if one of the parties to the transaction has large global or Chinese sales, then even a relatively small acquisition of an entity with more than about C$65 million in annual sales in China could be subject to MOFCOM review. A "concentration" includes the acquisition of a controlling interest in one entity by another. However, an acquisition of a minority interest may also constitute a "concentration" requiring notification if the minority interest in fact allows the purchaser to exercise control or decisive influence over the target company. In one case, MOFCOM determined that a purchaser exercised control over a company in which it owned a 27.9 percent equity stake. Timing of Reviews Chinese merger reviews can involve both extensive pre-filing consultations with MOFCOM and lengthy formal reviews. Once MOFCOM accepts a merger notification as complete, an initial 30-day waiting period begins. MOFCOM can extend the waiting period for another 90 days and again for a further 60 days (for a total of 180 days). However, the period of time between the initial filing of a notification or pre-filing consultations with MOFCOM and the date that a notification is formally accepted as complete (and the review period begins) can span several weeks or even months depending on the complexity of the transaction and the number of information requests from MOFCOM (and the parties' responsiveness to them). Reportedly, limited resources at MOFCOM may also cause it to prioritize certain files over others. The need to obtain MOFCOM approval has sometimes caused significant delays for merging parties. For example, in April 2013 Glencore received MOFCOM approval for its proposed acquisition of Xstrata approximately 14 months after public announcement of the transaction, while clearance had been obtained in other jurisdictions months earlier (including the EU in November 2012). More generally, MOFCOM often takes more than 30 days to clear even transactions that do not raise significant competition concerns. Substantive Test for Reviews The Anti-Monopoly Law requires MOFCOM to prohibit a transaction where it is likely to eliminate or restrict competition in China. However, in some cases MOFCOM has imposed conditions beyond those that would normally be expected to be sought by competition authorities in Canada, the US or the EU. For example, to obtain MOFCOM approval of its 2008 acquisition of Anheuser-Busch, InBev gave commitments to refrain from purchasing certain other Chinese beer manufacturers in the future, even though MOFCOM found that the InBev/Anheuser-Busch transaction did not itself restrict competition (see "Anheuser-Busch InBev: I'll drink to that" (Feb. 13, 2009), http://crossborder.practicallaw.com/4-384-9309). Enforcement Experience to Date Since the implementation of the Anti-Monopoly Law, MOFCOM has imposed remedies or conditions to merger clearance in a number of instances, including with respect to mergers of two companies based outside China. MOFCOM is generally viewed as very cautious about approving mergers. For example, in the Seagate/Samsung transaction involving hard disk drives, MOFCOM obtained significant remedies from Seagate, including a commitment to operate Samsung independently and a ban on requiring customers to purchase hard disk drives exclusively from Seagate, even though US and EU regulators had cleared the transaction unconditionally (see "Chinese Update – MOFCOM Clears Seagate/Samsung Deal – with conditions" (Feb. 9, 2012), http://xbma.org/forum/chinese-update-mofcom-clearsseagatesamsung-deal-with-conditions/). On the other hand, in the recent UTC/Goodrich transaction, MOFCOM completed its review and imposed remedies on the parties before US and EU regulators had completed their reviews. It may be that this development signals a willingness and desire by MOFCOM to take a leading position in future international mergers, or at least in selected transactions. INDIA India's Competition Act was initially passed in 2002, but its merger review provisions underwent numerous revisions before finally coming into force in 2011. Prior to the most recent revisions, the review provisions were widely regarded as extremely overbroad in their application to foreign mergers. For example, the provisions initially caught any transaction entered into by parties that had combined worldwide turnover in excess of approximately C$1.5 billion or worldwide assets in excess of approximately C$500 million, regardless of the extent of their turnover or assets in India. Further, there was no minimum shareholding threshold, such that even acquisitions of small minority interests could be caught. At the time the Act was initially passed, the notification regime was voluntary only, which minimized problems with the law's potentially broad appli- www.lexpert.ca | LEXPERT • June 2013 | 35 C-00-Firm.indd 35 13-05-17 10:06 AM