The Compulsory Notification Mechanism under Merger Control in China: Evaluation and Reform

Abstract

The compulsory notifications for mergers transactions under the framework of antitrust law aims to remedy anti-competitive harm by blocking or conditionally approving mergers ex ante in conjunction with the deterrence effects. However, such a mechanism brings prominent costs in addition to the benefits. It is thus necessary to evaluate both the costs and benefits to implement such a mechanism to see if there is an efficient alternative. The first decade of the enforcement of China’ merger control demonstrated insufficient benefits due to the low proportion of blocked and conditional approved cases and unsatisfactory deterrence effects. In the meanwhile, the costs to implement the compulsory mechanism in China is substantially larger, including high investigation costs, high opportunity costs associated with suspended merger transactions, and high notification costs. In comparison, the voluntary notification mechanism, though superficially producing less benefits in preventing anti-competitive mergers, can significantly save implementation costs. Given the limited administrative budget and the active ex post antitrust enforcement currently ongoing in China, the voluntary mechanism is advisable to be the most feasible option for the future reform.

Keywords: Merger Control, Compulsory Notification, Voluntary Notification, Costs and Benefit Analysis

JEL Classification: G34, K21, K42, L40