Anti Monopoly: Alibaba Tencent Byte Meituan And Other Giants Top Grid 500000 Fine Effective?

China's Internet industry anti-monopoly strong supervision is the general trend. What can a fine of 500000 yuan solve? The profit of these enterprises is 100 million yuan a day.

As soon as the two sessions of the National People's Congress and the people's Congress of the people's Republic of China were closed, the General Administration of market supervision made administrative punishment decisions on 10 cases of illegal concentration of business operators in the Internet field, involving Alibaba, Tencent, Jingdong, byte skipping, meituan and other leading enterprises.

Although 12 enterprises have been fined 500000 yuan by the top grid, the commercial income is obviously insignificant compared with the illegal business, and the enterprises are lucky to have no relevant punishment in the past years.

However, after the first Internet antitrust penalty was issued in December last year, the monopoly attribute of financing M & A has been taken seriously, and the risk of failing to declare the concentration of operators has increased significantly. Therefore, the anti-monopoly declaration has become a legal obligation that cannot be ignored in the merger and acquisition transactions involving vie structure.

The punishment mentioned that none of the 10 concentration cases had the effect of excluding or restricting competition, and did not require the separation, but did not disclose the specific evaluation details. The enhancement of the transparency of anti-monopoly law enforcement has become the expectation of the outside world.

In December last year, the antimonopoly Bureau disclosed that it had received reports involving Internet enterprises suspected of failing to declare concentration of business operators in accordance with the law, involving many enterprises, a wide range of industries and a long time span, which is under investigation.

After the regulation has opened a new page, I wonder where the hammer of Internet antitrust will fall next time?

Top grid punishes 12 enterprises

According to the 21st century economic report, the 10 cases of illegal concentration of business operators involved giants, including Alibaba, Tencent, Jingdong, Baidu, byteco, meituan, Didi, Suning, tal, niucafu, etc.

For example, in the case of Yintai commercial acquisition of Kaiyuan business, the ultimate controller of Yintai is Alibaba; the joint venture between Shanghai Oriental newspaper Co., Ltd. and quantum leap is controlled by human byte leaping; in Chengdu meigenmei's acquisition of Wangjiahuan equity, meituan is behind meigenmei; in Suqian Hanbang's acquisition of Wuxing electrical appliances, Suqian Hanbang's ultimate controller is Beijing East Group.

The 10 cases punished this time violate Article 21 of the anti monopoly law and constitute illegal concentration.

What is concentration of business operators? According to Article 20 of the antimonopoly law, "concentration of business operators refers to the following situations: (1) merger of operators; (2) control of other operators by acquiring equity or assets; (3) control of other operators by means of contracts or other means.".

In the 10 cases, most of the transactions were equity acquisition. For example, Suqian Hanbang acquired 100% equity of Wuxing electrical appliances through multi-step transaction; Yintai commercial acquired 100% equity of its wholly-owned subsidiary Kaiyuan commercial with RMB 3.36 billion yuan; Tencent subscribed 83.33% of the shares issued in this round of financing by signing an f-round equity subscription agreement with ape guidance, and obtained control over ape guidance. Only Dongfang newspaper and quantum leap, Didi mobile and Softbank shares set up joint ventures.

If the concentration of business operators meets the declaration standards stipulated by the State Council, the business operators shall report to the anti monopoly law enforcement agency of the State Council in advance. None of the above-mentioned 10 cases was reported to the anti-monopoly law enforcement agency of the State Council in advance.

However, although it constitutes illegal concentration, the report said that the assessment does not have the effect of excluding or restricting competition.

"This shows that they have violated the procedural provisions of the anti monopoly law, but after substantive examination, they have no impact on the trading competition, and if the declaration can still be approved." Gu Zhengping, partner of Anjie law firm, told 21st century economic reporter.

The General Administration of market supervision imposed a fine of 500000 yuan on 12 enterprises including Yintai commercial (Group) Co., Ltd. According to the existing law, this is already a top punishment for illegal concentration of business operators.

According to Article 48 of the anti monopoly law, if a business operator violates the provisions of this law to implement concentration, the antimonopoly law enforcement agency of the State Council shall order it to stop the concentration, dispose of its shares or assets within a time limit, transfer its business within a time limit and take other necessary measures to restore it to the state before concentration, and may be fined not more than 500000 yuan.

A fine of 500000 is not enough to deter

As for the punishment for failing to declare the concentration of business operators according to law, Baidu has already mentioned it in the prospectus (post hearing data set) submitted by Baidu for secondary listing in Hong Kong on March 9.

Baidu disclosed that in January this year, it received a notice on filing a case, asking for materials on whether the undeclared transactions constituted a concentration of operators not declared in accordance with the law. Recently, baidu did not object to the proposed penalty after receiving a notice that the case was to be fined 500000 yuan.

It is one of the reasons why enterprises fail to declare according to law.

The reason given by Baidu for not reporting in advance is that, considering the regulatory history of the Internet industry and past industry practices, only recently have a few Internet companies with vie structure been investigated for suspected concentration of operators, and in the past, several Internet companies have failed to accept the declaration of concentration of business operators.

Since the "anti monopoly law" came into effect in the past 12 years, the anti-monopoly law enforcement agencies have not investigated and dealt with the cases of concentration of business operators that have not been declared in accordance with the law in the Internet industry. Until December 2020, Alibaba, Tencent and Fengchao failed to report the concentration cases involving vie structure.

However, the antimonopoly Bureau has mentioned in December last year that it is reviewing the merger of tiger tooth Betta Fish according to law. Recently, it has received some tips concerning Internet enterprises suspected of failing to declare and illegally implement concentration of business operators according to law. There are many enterprises involved, a wide range of industries and a long time span. Therefore, it is speeding up the verification and investigation and handling according to law.

Low punishment also makes it too easy for enterprises to evade legal responsibilities.

Although it is already a fine of 500000, it is obviously insignificant compared with the commercial benefits brought by the concentration of operators. In response to a reporter's question on December 14 last year, the main person in charge of the antimonopoly Bureau admitted: "compared with other jurisdictions, the amount of fines for illegal concentration of undertakings in China is indeed low, and the deterrent power is limited."

In January 2020, the State Administration of Market Supervision announced the revised draft of the anti-monopoly law, which is the first revision since the implementation of the current anti-monopoly law for 12 years, and the new Internet formats are included for the first time. At the same time, we have increased the intensity of punishment for violations of laws and increased the upper limit of fines not declared according to law from 500000 yuan to 10% of the sales volume of the previous year.

If the plan is adopted by the final revised anti-monopoly law, the administrative penalty for failing to declare in accordance with the law in the future may be hundreds of millions of yuan.

"Concentration of business operators not declared according to law is invalid before approval. Therefore, law enforcement agencies can also investigate and deal with the horizontal or vertical agreement competition agreements between the two sides of the concentration that have not been declared according to law." Liu Xu, a special researcher at the National Institute of strategic studies at Tsinghua University, told the 21st century economic report that if the horizontal and vertical restrictions on competition during this period are punished, they will be fined 1% to 10% of the sales volume of the previous year and their illegal income will be confiscated.

Enhancing transparency in law enforcement

In the three penalty cases of Alibaba, Tencent and Fengchao, the decision of punishment did not require the operators to return to the state before concentration, that is, there was no need to split up.

At that time, the antimonopoly Bureau said: "returning to the state before concentration will have a great impact on the development of enterprises and economic operation. From the perspective of the illegal implementation of centralized law enforcement in China and the experience of foreign law enforcement, it is generally applicable only when the transaction has the effect of eliminating or restricting competition."

This centralized disclosure of 10 cases of punishment is the same, did not require operators to return to the state before concentration.

"After full payment of the fine, we do not expect to be further punished by the State Administration of market supervision for the case." Baidu disclosed in the prospectus.

Paragraph 1 of Article 53 of the anti monopoly law stipulates that "if you are not satisfied with the decision made by the anti-monopoly law enforcement agency in accordance with Articles 28 and 29 of this law, you may first apply for administrative reconsideration according to law; if you are not satisfied with the decision of administrative reconsideration, you may bring an administrative lawsuit according to law."

Liu Xu said that if the review decision of the case is considered controversial, other operators and consumers affected can file administrative reconsideration or even administrative litigation.

However, for the 10 cases did not have the effect of excluding and restricting competition, the official did not disclose the specific evaluation details.

In the three penalty cases in December last year, the relevant person in charge of the antimonopoly bureau had related discussions on the case investigation, such as "comprehensively evaluated the impact of concentration on the market competition, not only investigated the competition situation and development trend of the relevant market where the target company is located, but also investigated the business association between the buyer and the target company and the possible impact of the platform characteristics".

"This punishment decision shows that the enforcement transparency of the review of concentration of business operators is low, the disclosure of case information is extremely simple, the outside world is unable to participate in the relevant review procedures, and there is no opportunity to directly feed back opinions on the case to the anti-monopoly law enforcement agencies." Liu Xu said that the simple cases of concentration of business operators with little impact on market competition and low market share still need to declare information publicly and give feedback to the outside world within 10 natural days.

Liu Xu suggested that for the cases of concentration of business operators that have not been declared according to law, the reporting information, case filing information and investigation progress should also be made public, so that the outside world can provide feedback, help law enforcement agencies overcome the weakness of information asymmetry, prevent insider trading, protect the interests of investors and reasonable expectations.

"The monopoly attribute of financing M & A itself is valued." Dong Yizhi, a lawyer from Shanghai zhengce law firm, said that the "Interim Provisions on the review of concentration of business operators" and the anti-monopoly guide in the field of platform economy, which have been issued, are jointly promoted at the guidance level and the practical level, and there will be a large number of audit links in the future investment and financing mergers and acquisitions. In order to ensure the orderly development of the market, this kind of review is very necessary when several heads of the market adopt acquisition and other behaviors to "merge" in order to expand their territory in the next step.

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