On December 14, 2020, the State Administration for Market Regulation issued a written decision on the punishment of three cases involving failure to declare concentration of undertakings in the three cases [2020] [2020] No. 26, No. 27, and No. 28.

Looking at these three cases, the following common points are shown: first, they are all equity acquisitions under the control of the agreement (hereinafter referred to as the "VIE" structure); second, the acquirers are all Internet platform companies; third, after evaluation by law enforcement agencies, The acquisition does not have the effect of eliminating or restricting competition, and all are subject to a fine of 500,000 yuan, which is the upper limit of the penalty in Article 48 of the current Anti-Monopoly Law.

　　This is the first time since my country officially implemented anti-monopoly law enforcement on August 1, 2008, penalties have been imposed on failure to declare the VIE structure.

It is not uncommon to impose penalties on failure to declare in accordance with the law in anti-monopoly law enforcement, and dozens of cases have been announced so far.

This is the first time a VIE has been punished for failing to declare in accordance with the law after a lapse of twelve years, and the obvious feature of the Internet platform has been superimposed. The market has many interpretations and speculations on this.

The author expresses my opinion based on the research and analysis of related issues.

　　1. Anti-monopoly review on the concentration of agreement control (VIE) operators

　　Agreement control refers to a legal model in which a proposed listed company establishes a listed shell company overseas and establishes a series of contracts and agreement frameworks with domestic entities to control domestic entities, thereby indirectly achieving the purpose of listing domestic entities overseas.

Agreement control is essentially the use of legal provisions and accounting rules for different identification standards for a certain matter, through a complex structure of multi-level agreements, to control the business and finances of domestic operating companies, making them a variable interest entity of overseas holding companies. In order to realize the legal transfer of domestic operating interests to overseas, it can effectively circumvent the restrictions on foreign investment access in certain industries by domestic laws and regulations and the relevant restrictions on domestic entities directly listing overseas.

Accordingly, agreement control usually has the characteristics of complex transaction structure, multi-jurisdictional control, and indirect control through agreement.

VIE involves the issue of “control” in the sense of the anti-monopoly law. Therefore, when a company involving the VIE structure meets the declaration standards for concentration of undertakings, it should proactively report to the Anti-monopoly Law Enforcement Agency of the State Council and provide true and complete information. For review purposes, the concentration of undertakings shall not be carried out without declaration.

　　On April 20, 2020, the State Administration for Market Regulation announced the filing of a simple case involving the VIE structure, namely "Shanghai Mingcha Zhegang Management Consulting Co., Ltd. and Huansheng Information Technology (Shanghai) Co., Ltd. Newly established a joint venture case." It is the review of VIE cases from the front; and the penalties for these three cases are the negative explanation of the anti-monopoly enforcement of VIE cases that have not been declared according to law.

　　In the three penalties in this case, there are both acquirers and acquired parties that apply the VIE structure. It can be seen that under the legal principles of the anti-monopoly law, law enforcement agencies are concerned about the possible changes in market structure and the impact of competition order after the concentration. , Has no essential relationship with the manifestation of the control relationship.

In 2020, the Market Supervision Administration announced to the public the "Guidelines on Platform Economy in the Field of Anti-monopoly (Draft for Comment)" Article 19, paragraph 2 stipulates that "concentration of undertakings involving the agreement control (VIE) structure is an anti-monopoly under concentration of undertakings. Examination scope. If the concentration of undertakings meets the reporting standards set by the State Council, the undertakings should report to the Anti-monopoly Law Enforcement Agency of the State Council in advance. Those who have not declared shall not be concentrated.” This is a reiteration and emphasis on the VIE undertaking concentration examination rules.

　　2. Anti-monopoly regulation on platform companies

　　Punishment of failure to declare in accordance with the law is the statutory duty of the anti-monopoly law enforcement agency, and it is also a necessary means to increase the intensity of anti-monopoly law enforcement and administration in accordance with law.

According to the author's statistics, as of December 31, 2019, a total of 47 cases of administrative punishments were not declared in accordance with the law. From 2014 to 2019, the number of public punishment cases increased year by year, and the average fines increased year by year (see the table below).

　　From a historical perspective, the punished companies are located in different industries, with different characteristics, and they are all different. The acquirers involved in this case are all platform companies. This first shows that regardless of the company’s business scale, business model, or control method All must abide by market standards and comply with the provisions of the Anti-Monopoly Law, and platform companies are no exception.

Secondly, the three cases also show that objective reasons such as foreign investment supervision or financing rules have made it more likely that online platform companies will adopt the VIE structure than other industries.

Finally, the aggregation efficiency of platform companies combined with the rapid expansion of mergers and acquisitions is more likely to cause market competition damage, and it is more likely to attract the attention of law enforcement agencies.

At present, the strangling acquisitions that the theoretical and practical circles at home and abroad are paying attention to are examples.

　　It should be noted that the competition concerns of law enforcement agencies on platform companies are not limited to the field of operator concentration.

The "Guidelines on Anti-monopoly in the Field of Platform Economy (Draft for Comment)" have provisions on monopoly agreements and abuse of dominant market positions.

The punishment for failure to declare in accordance with the law can be regarded as a warning and urge for the platform companies to fully comply with regulations.

　　Third, impose top administrative penalties on illegal enterprises

　　Article 48 of the “Anti-Monopoly Law” stipulates that “If an operator violates the provisions of this law to implement concentration, the Anti-Monopoly Law Enforcement Agency of the State Council shall order it to stop the concentration, dispose of equity or assets within a time limit, transfer business within a time limit, and take other necessary measures to restore the concentration before the concentration. In the state, a fine of less than 500,000 yuan can be imposed.” The administrative fines for the three cases announced in this announcement are all at the legal maximum limit of 500,000 yuan.

　　First of all, after the evaluation by law enforcement agencies, the concentration involved does not have the effect of eliminating or restricting competition. This is the basic prerequisite for failing to take measures to "restore to the state before the concentration". Otherwise, regardless of the amount of fine, only this kind of money will be fined. Compensation cannot make up or correct competition damage.

　　Secondly, in terms of the amount of fines, 500,000 yuan is the maximum limit under the current law, and it is currently the only case that has been punished at the top.

From the perspective of administration according to law, it is necessary to punish in accordance with the law and to comply with the principle of proportionality.

Unlike other administrative penalties for monopolistic acts, the penalties for illegal implementation of concentration do not use the turnover of the illegal enterprise as the basis for fines, but "may" impose a fine of less than "500,000 yuan".

Article 55 of the "Anti-Monopoly Law" Amendment Draft (Draft for Public Comment) published by the State Administration of Market Supervision and Administration in January 2020 stipulates that the fines for operators' illegal implementation of concentration shall be more than one percent of the previous year's sales Less than ten, which is consistent with the punishment rules for other illegal acts, and can effectively deter illegal acts based on the calculation method of business turnover.

　　The limit penalties in these three cases reflect from one side the law enforcement agencies’ understanding of the nature, extent and duration of the illegal activities of the case, and they are also a deterrent to specific companies and a general preventive warning to the market.

The three acquired companies are large in size, strong in market influence, and frequent centralized transactions. If effective supervision is not achieved, it will cause drastic changes in the market structure and cause disorderly competition.

Coupled with the unique characteristics of the Internet platform economy, such as dynamic competition, cross-industry competition, and network effects, it affects the market's competitive landscape in a wide range and depth. From the macro level of the market, it is related to the industrial concentration and the innovative vitality of enterprises. More should abide by the Anti-Monopoly Law, maintain free and fair competition in the market, and achieve the overall high-quality development of the Internet ecosystem.

　　(This article Source: Economic Daily Author: Zhangchen Ying, Department of Tsinghua University Law School associate professor, doctoral tutor, director of the Research Center for Competition Law, the Anti-monopoly Committee Expert Advisory group member, vice president of the China Law Society Business Law Research Association)