MOFCOM wants to penalize violators of rules on mergers and deals. (Photo : Getty Images)
MOFCOM said that they will continually crack down and punish companies who do not seek approval prior commencement of mergers.
Companies must notify MOFCOM of mergers and deals if the sales in China exceeds 2 billion yuan.
According to lawyers, companies avoid filing with MOFCOM as it derails the acquisition process.
Liyong Jiang, a partner at Gaopeng & Partners and a former MOFCOM legal official, said, "Some players do not have the knowledge, but some companies deliberately avoid filing, including some state-owned enterprises, as it can be quite a lengthy and uncertain timetable."
The Ministry has been aggressive in its drive to penalize companies who are guilty of "gun-jumping," or forming mergers without the government's knowledge. In the past 11 months, MOFCOM imposed penalties to Microsoft, Hitachi, and Bombardier.
The president of Bombardier China, Jianwei Zhang, said that their company formed a joint venture in 2015 because a delay might stop them from participating in a railway project tender with China's New United Group.
Adrian Emch, a partner at Hogan Lovells said, "Companies making a joint tender bid have faced serious difficulties: if they sought antitrust approval, incorporation of the JV could be delayed and the opportunity might be gone by the time approval came."
He added, "An alternative would be not to file, but this might breach the law. Damned if you do, damned if you don't."
The MOFCOM has improved its procedures by shortening the process to 29 days. Almost all deals are using the simplified and faster process. The fine for non-compliance is only 500,000 yuan.
Because of the low fine, companies just pay the amount instead to going through the filing procedure. The Ministry has resorted to public shaming.
Marc Waha, head of the Asia antitrust practice at Norton Rose Fulbright, said that MOFCOM officials are frustrated and are eager to gain more teeth when the antimonopoly law is revised.
