[co-author: Ken Dai]

Since the Anti-Monopoly Law came into effect in 2008, China has established a merger control regime now administered by the State Administration for Market Regulation (SAMR). Transactions that meet the notification thresholds, including mergers and acquisitions of equity or assets, are subject to prior notification and review by SAMR. The review may result in unconditional approval, conditional approval or prohibition. Over the past 17 years, SAMR has reviewed more than 6,000 merger control cases in China, with only 62 cases conditionally approved and 3 cases prohibited. Under Chinese law, parties dissatisfied with a merger control decision issued by SAMR may apply for administrative reconsideration or file an administrative lawsuit with the court. In practice, however, it is extremely rare for companies to initiate judicial proceedings against merger control decisions.

In 2024, Beijing Tobishi Pharmaceutical Co., Ltd. (“Tobishi”) filed an administrative lawsuit against SAMR in the Beijing Intellectual Property Court. This dispute, known as the Tobishi case, challenged SAMR's decision regarding Simcere Pharmaceutical Group's (“Simcere”) acquisition of Tobishi. For the first time ever in China, a company is contesting an antitrust authority's decision within the merger control framework.

On 30 December 2024, the Beijing Intellectual Property Court issued a first-instance judgment (Case No. (2024) Jing 73 Xing Chu No. 5180) dismissing all of Tobishi's claims. Since Tobishi did not appeal, the judgment became final.

As China's inaugural case of a company challenging a merger control decision via administrative litigation, the Tobishi case holds significant precedential value and practical legal implications for China’s merger control practice.

I. Case Background: Shareholding Disputes Examined from an Antitrust Perspective

Tobishi was established in 1993 and has been active in the pharmaceutical manufacturing market in China. It is the only Chinese company that has obtained the license to produce batroxobin injections. The conflict between Tobishi and Simcere, rooted in a long-standing shareholding disagreement, eventually escalated into significant antitrust disputes.

A. Commercial Dispute: The Origin and Development of the “Double Sale of Shares” Issue

The dispute between Tobishi and Simcere began with a “double sale of shares”:

• The founding shareholder of Tobishi was Japan Tohrei Pharmaceutical Industry Co., Ltd. On 21 March 2013, the shareholder of the company was changed to Co., Ltd. (“Zibo”).
• In 2014, Shijiazhuang Shuntong Co. acquired a 67% equity interest in Tobishi, while Zibo retained a 33% shareholding. In 2016, Zibo authorized an individual named Zhou Yanjun to recover all of Tobishi’s equity and promised to transfer 65% of the shares to Zhou upon successful recovery. Subsequently, Shuntong withdrew, Zibo regained full ownership of Tobishi, and Zhou Yanjun became the legal representative of Tobishi.
• In 2017, Zhou Yanjun filed a lawsuit against Zibo, seeking the fulfillment of the promise to transfer the 65% equity interest. In the same year, Simcere entered into an agreement with Zibo to acquire 100% of the equity in Tobishi.
• However, in 2019, Jiangxi Puyuan Health Industry Co., Ltd. (“Puyuan”) entered into an agreement with Zhou Yanjun to acquire 100% of Tobishi’s equity, conditional upon Zibo’s consent, and subsequently completed the change of Tobishi’s legal representative, with Puyuan taking over the actual management of Tobishi.
• Simcere alleged that Zibo had breached the agreement and initiated two arbitration proceedings in 2019 and 2021, requesting Zibo to pay liquidated damages of RMB 50 million and to continue performing the equity transfer agreement. Both arbitral tribunals ruled in favor of Simcere’s claims.

At this point, although Puyuan had taken over the actual management of Tobishi, it had not yet acquired the equity, while the equity transfer agreement between Zibo and Simcere had been ruled valid and was pending performance. This placed Tobishi and Zibo in a dilemma of a “double sale of shares.”

B. A Triple Antitrust Defense Strategy

In order to prevent Simcere from acquiring Tobishi, Puyuan, which controlled Tobishi, launched a three-pronged defense strategy from an antitrust perspective:

• Administrative Penalty: On 29 April 2019, Simcere entered into a Cooperation and Supply Agreement with a Swiss company named Nutritio-nal Products Ltd Branch Pentapharm (“DSM”). DSM is the only company in the globe that supplies batroxobin active pharmaceutical ingredient (API). Under the agreement, Simcere gained exclusive rights to sell batroxobin active pharmaceutical ingredient (API) in China. In September 2020, Tobishi filed a complaint with SAMR, alleging that Simcere’s refusal to supply batroxobin API to Tobishi constituted an abuse of market dominance. On 22 January 2021, SAMR issued an administrative penalty decision, finding that Simcere’s conduct constituted a refusal to deal in violation of the Anti-Monopoly Law, ordering Simcere to cease the illegal conduct and imposing a fine of RMB 100.7 million.
• Voluntary Notification below the Filing Threshold: On 29 June 2022, Tobishi submitted a merger control notification to SAMR. The transaction was not subject to mandatory notification, as Tobishi’s turnover in the previous fiscal year does not meet the filing threshold. Nonetheless, Tobishi submitted the filing voluntarily, claiming that it had anti-competitive influence. Subsequently, Simcere also submitted its notification materials. On 22 September 2023, SAMR issued a conditional approval decision for Simcere’s acquisition of Tobishi.
• Administrative Reconsideration and Judicial Review: Dissatisfied with SAMR’s conditional approval decision, Tobishi filed an application for administrative reconsideration with SAMR. On 18 February 2024, SAMR issued a reconsideration decision upholding its original decision. Subsequently, Tobishi filed the present administrative litigation. On 30 December 2024, the Beijing Intellectual Property Court issued its first-instance judgment, finding that SAMR’s conditional approval decision was supported by sufficient evidence, applied the relevant laws and regulations correctly, and complied with legal procedures, and accordingly dismissed Tobishi’s claims.

As the administrative litigation did not suspend the enforcement of the administrative decision under dispute, Simcere acquired 100% of the equity in Tobishi in April 2024. Simcere then promptly completed the re-election of the board of directors and implemented sole control over Tobishi. Tobishi chose not to appeal, putting an end to the years-long conflict.

C. Pharmaceutical Industry: A “Hard-Hit Area” for Monopoly Issues

It is not a coincidence that China’s first administrative litigation concerning a conditional merger control decision arose in the pharmaceutical sector. Due to its close connection to public welfare and the frequent occurrence of illegal conduct, the pharmaceutical sector has long been a key focus of China’s competition enforcement authorities. In 2023, antitrust fines imposed in the pharmaceutical industry totaled RMB 1.77 billion, accounting for 81.8% of all antitrust fines, making it unquestionably the primary focus of enforcement for the year.

Currently, antitrust cases in the pharmaceutical sector are mainly concentrated in administrative enforcement and civil litigation, and they demonstrate distinct characteristics. At the enforcement level, competition authorities’ regulation of the pharmaceutical sector is characterized by “strict supervision, high penalties, and comprehensive coverage.” From the perspective of enforcement targets, the focus has gradually expanded from active pharmaceutical ingredients (APIs) to encompass finished pharmaceutical products and medical devices. In terms of penalty calculation, pharmaceutical cases have clarified a comprehensive standard for calculating the total amount of fines. Regarding the regulation of illegal conduct, vertical monopoly agreements (particularly resale price maintenance) and abuse of market dominance (such as unfairly high prices and refusal to deal) have traditionally been key areas of focus. Meanwhile, there has also been practice addressing new types of monopolistic conduct, such as monopoly agreements organized by individuals. In the judicial domain, the courts have sought to balance the relationship between innovation and competition, recognizing that innovative patents may obtain supra-competitive profits, while also providing guidance through typical cases on issues such as reverse payment agreements and unfairly high prices in the pharmaceutical sector.

As China’s first administrative litigation concerning merger control, the Tobishi case represents a further exploration and development of antitrust practice in the pharmaceutical sector.

II. Standing of Plaintiffs in Merger Control Litigation

A merger control transaction often involves multiple parties. Taking an equity acquisition as an example, the companies involved may include the target company, the purchaser, the selling shareholders, and other existing shareholders. In merger control litigation, the question of who has standing to sue is the first issue that must be addressed.

A. Administrative Litigation Concerning Merger Control

Administrative litigation concerning merger control refers to lawsuits filed by plaintiffs against SAMR, challenging its decisions on merger control review. Before determining who may qualify as a proper plaintiff, it is necessary first to clarify the nature of SAMR’s conduct in reviewing and approving merger control transactions. In the Tobishi case, the court confirmed that the specific administrative act of reviewing a merger control notification and rendering a decision constitutes an administrative licensing act.

1. Provisions on Standing of Plaintiffs under Administrative Law

With respect to the standing of plaintiffs in administrative litigation, Article 2 of the Administrative Litigation Law of the People’s Republic of China provides a general provision, stating that “citizens, legal persons, or other organizations that believe that an administrative act of an administrative organ or its staff has infringed upon their lawful rights and interests shall have the right to bring a lawsuit before a people’s court in accordance with this Law.” This establishes “infringement of lawful rights and interests” as the prerequisite for initiating administrative litigation. Article 25 specifies the subjects eligible to file a lawsuit, providing that “the person subject to the administrative act and other citizens, legal persons, or other organizations that have an interest in the administrative act shall have the right to file a lawsuit.” Article 12 of the Interpretation of the Supreme People’s Court on the Application of the Administrative Litigation Law of the People’s Republic of China further clarifies the meaning of “having an interest,” including the following circumstances: (a) the challenged administrative act concerns their neighboring rights or the right to fair competition; (b) they are added as a third party in administrative reconsideration or other administrative procedures; (c) they request the administrative organ to hold the infringer legally accountable according to law; (d) the revocation or alteration of the administrative act concerns their lawful rights and interests; (e) they lodge a complaint with an administrative organ to protect their lawful rights and interests, and the administrative organ with the duty to handle the complaint has acted or failed to act; (f) other circumstances in which they have an interest in the administrative act.

In other words, with respect to a merger control review decision, it is necessary for the party subject to the administrative act whose lawful rights and interests have been infringed, or other parties who have an interest in the administrative act, to bring the lawsuit.

As for specific grounds, Article 12 of the Administrative Litigation Law (2017) provides that “where a citizen, legal person, or other organization applies for administrative licensing and the administrative organ refuses to grant it or fails to respond within the statutory time limit, or where the citizen, legal person, or other organization disagrees with other decisions made by the administrative organ in relation to the administrative licensing,” the people’s court shall accept the case. Article 4 of the Administrative Licensing Law (2019 Amendment) stipulates that “the establishment and implementation of administrative licensing shall be conducted in accordance with the statutory authorities, scope, conditions, and procedures.” Article 7 further provides that “citizens, legal persons, or other organizations shall enjoy the right to make statements and defend themselves with respect to administrative licensing implemented by administrative organs, and shall have the right to apply for administrative reconsideration or to initiate administrative litigation in accordance with the law; if their lawful rights and interests are damaged due to the illegal implementation of administrative licensing by administrative organs, they shall have the right to claim compensation in accordance with the law.” From the above provisions, it can be seen that if an administrative licensing decision is made without adhering to the statutory authorities, scope, conditions, and procedures, it can be deemed an infringement upon lawful rights and interests and may constitute a cause of action for litigation.

2. Court’s View: Only Parties Affected by the Decision Have the Right to Sue

In the Tobishi case, the plaintiff, Tobishi, was the target company in the equity acquisition transaction, and SAMR argued in its defense that Tobishi did not have standing as a proper plaintiff. Therefore, the Beijing Intellectual Property Court first analyzed who may qualify as a proper plaintiff in administrative litigation concerning merger control decisions.

The court held that not all companies involved in the transaction, such as the target company, the purchaser, the selling shareholders, and other existing shareholders, may file administrative litigation challenging SAMR’s merger control decision.

The first thing the court examined when dealing with the matter is whether or not the transaction was unconditionally approved. The court held that if SAMR issues a decision not to prohibit the notified concentration, the rights and obligations of the transaction parties remain unchanged, and their interests are not affected. Only when the decision is conditional or prohibitive are the transaction parties’ ¹interests affected, entitling them to initiate litigation.

The rationale underlying this is that when the transaction parties sign the agreement and submit the notification, such action reflects their genuine intention, which is to obtain unconditional approval and go through with the transaction. If the review authority renders an unconditional approval decision, the parties’ original objectives are fully realized, and their rights and obligations remain unaffected. This reasoning is consistent with EU practice, where the EU courts have held that an appellant’s standing is sufficient only when the annulment of the Commission’s decision “is capable of producing legal effects,” and that where an unconditional approval decision does not itself produce legal effects, the transaction parties do not have standing to appeal.

The second element the court considered is whether the transaction parties’ interests had been substantively affected by the decision. The court held that in this transaction, the review decision imposed statutory obligations on Tobishi after the concentration, which had a substantive impact on Tobishi’s lawful rights and interests, thereby entitling Tobishi to standing as a proper plaintiff.

It is worth noting that the Beijing Intellectual Property Court specifically mentioned that the restrictive conditions were proposed unilaterally by Simcere, not by Tobishi, and thus would affect Tobishi’s interests. From another perspective, as Simcere voluntarily proposed these restrictive conditions, regardless of whether they were the result of multiple rounds of negotiations with SAMR or whether they deviated from Simcere’s initial transactional objectives, Simcere, having voluntarily agreed to and proposed these conditions, does not have standing to challenge the conditional decision.

The underlying rationale here is similar to the first point and focuses on the reflected intention of the parties. When SAMR’s review decision is consistent with the transaction objectives of the companies, whether these objectives are stated in the original transaction agreement or adjusted through subsequent negotiations, the rights and interests of the enterprise remain unaffected, and the enterprise does not have standing to challenge the decision.

This transaction involved multiple parties, including Simcere, Tobishi, the original shareholder Zibo, and the current controlling shareholder Puyuan. Following the court’s reasoning, Zibo would not having standing to sue, as it would exit Tobishi after the transaction and therefore not affected by the restrictive conditions. Similarly, Puyuan, not being a shareholder of Tobishi upon completion of the transaction, would not be subject to the restrictive conditions, and likewise does not have standing. Therefore, in the Tobishi case, only Tobishi has the right to initiate administrative litigation.

3. Further Exploration of Standing in Administrative Litigation Concerning Merger Control

As the Tobishi case solely concerned a lawsuit brought by the target company challenging the conditional approval, the court’s discussion on standing primarily focused on the specific issues relevant to the case. However, given the inherent complexity of merger control transactions, which often involve multiple parties, and the potentially broad impact of such transactions on both the parties themselves and other market participants, the scope of proper plaintiffs in administrative litigation concerning merger control decisions may extend beyond the circumstances addressed in the Tobishi case.

The outcomes of merger control reviews generally fall into three categories: unconditional approval, conditional approval, and prohibition of the concentration. To assess issues of standing, it may be necessary to examine, under each of these three scenarios, (a) who constitutes the party subject to the administrative act and parties with an interest in the act in the context of merger control review, and (b) under what circumstances “infringement of lawful rights and interests” is established.

Regarding the first question, it is necessary to distinguish between the “party subject to the administrative act” and “parties with affected interests”:

• Chinese law does not explicitly define “the party subject to the administrative act,” but it is generally understood to refer to the counterparty to the administrative authority in an administrative legal relationship, namely, individuals or organizations in a subordinate position subject to administrative management whose interests are affected by the administrative act. Specifically in the context of merger control, parties subject to the administrative act should be the entities permitted or prohibited from engaging in the concentration. Given that the outcomes of merger control reviews do not only affect the notifying party but also impact the entire transaction, the party subject to the administrative act in merger control should not be limited to the notifying party. Other parties involved in the concentration, such as the target company and even the original shareholders, should also be considered parties subject to the administrative act in the context of merger control review.
• “Parties with affected interests” on the other hand, may include those affected by the concentration, such as other undertakings and consumers in the relevant market that may be impacted by the merger.

Regarding the second question, it is more complex and, in our view, requires separate consideration of procedural and substantive aspects:

• If it is alleged that there are procedural issues in the review process, such as exceeding the statutory review period, depriving the right to a hearing or to make statements, or other procedural irregularities, then regardless of the review outcome, parties with corresponding rights as parties subject to the administrative act should have the right to bring a lawsuit.
• If it is alleged that there are issues with the substantive outcome of the review, it may be necessary to assess, based on the specific review outcome, whether lawful rights and interests have been infringed. This involves many issues that remain unclear under the current legal framework and practice in China. For example: (a) In cases of unconditional approval, the content of the transaction remains unchanged, and the rights and interests of the transaction parties are not affected. However, if the unconditional approval may harm the rights to fair competition of other market participants, should third parties have the right to initiate administrative litigation as parties with an interest in the administrative act, or should they pursue civil litigation under the cause of action of disputes over merger control?² It would be only reasonable that in such cases, third parties should have their own judicial remedies. (b) In cases of conditional approval, as noted by the Beijing Intellectual Property Court in this case, it should be assessed whether the imposed conditions affect the rights and interests of parties subject to the administrative act and third parties. If the conditions imposed are against the will of the party concerned and affect that party (for example, a target company that disagrees with the restrictive conditions, or competitors who believe that the conditions are insufficient to eliminate anti-competitive effects), should such parties also be deemed to have standing? (c) In cases where the concentration is prohibited, the transaction is substantively affected by the administrative act, allowing all transaction parties to file lawsuits. However, as the competitive conditions in the market do not change before and after the prohibition, should other competitors and consumers in the relevant market be entitled to file lawsuits as parties with an interest in the administrative act in such circumstances?
• Additionally, it is worth exploring whether a distinction should be made between procedural and substantive disputes when considering the application of the leapfrog appeal system in antitrust cases.

From the perspective of European and American legal practice, the EU’s approach is similar to China’s, as the EU allows two categories of parties to appeal the European Commission’s merger control decisions: first, natural persons or legal entities as parties subject to the administrative act, i.e., the transaction parties; and second, third parties with a direct and individual concern. In contrast, the practice in the United States differs, as antitrust review of mergers is primarily conducted through judicial proceedings, with issues of standing determined according to the rules of civil procedure in judicial adjudication. The scenario most comparable to China’s administrative litigation is the challenge to decisions made by the Federal Trade Commission (FTC) through its internal quasi-judicial procedures, where transaction parties dissatisfied with the FTC’s merger control decision may appeal to the courts. However, third parties are not entitled to file such appeals. If third parties believe that the merger has infringed upon their lawful rights and interests, they must seek private remedies through separate proceedings.

4. Civil Litigation Concerning Merger Control

Although in 2011 the Supreme People’s Court of China amended the Provisions on the Causes of Action in Civil Cases by adding “disputes over merger control” as a third-level cause under the second-level category of “monopoly disputes,” therefore if a merger infringes upon the right to fair competition of other parties, the party whose rights have been infringed may also have the standing to file a civil lawsuit against the transaction parties concerning the merger. However, to date, there have been no civil disputes related to merger control in China.

China’s approach is similar to that of the EU. Under the EU competition framework, private entities can only challenge allegedly unlawful mergers by filing complaints with enforcement authorities. However, in exceptional circumstances, private entities may file lawsuits before courts seeking civil damages on the grounds that the proposed transaction violates prohibitions against anti-competitive agreements and the abuse of market dominance. ³As noted earlier, under US law, civil litigation concerning mergers is permitted, and parties who have suffered antitrust harm may bring civil lawsuits before federal district courts to challenge merger transactions. Such parties may include competitors, consumers, and upstream and downstream undertakings. US courts determine standing on a case-by-case basis, assessing whether the party has suffered antitrust harm as a result of the merger.

III. Analysis of the Key Points of the Court’s Judgment

This case is the first administrative litigation concerning a merger control review decision under China’s Anti-Monopoly Law and therefore carries significant practical implications.

A. Merger Control Review: Concentrations with the Effect of Eliminating or Restricting Competition Are Not Automatically Subject to Prohibition

Tobishi’s purpose in submitting the notification was not to facilitate the transaction but rather to seek the intervention of the enforcement authority to block Simcere’s acquisition. Accordingly, in the litigation, Tobishi argued that “for concentrations that have or may have the effect of eliminating or restricting competition, prohibition is the statutory and preferred remedy,” and that SAMR should directly prohibit the concentration in question. In response, the court explicitly held that concentrations that have or may have the effect of eliminating or restricting competition are not necessarily subject to direct prohibition. If a remedies package can effectively mitigate the adverse effects, a conditional approval decision may be issued.

In merger transactions, it is not uncommon for a party (primarily the target company) to use notification as a means to block the deal. As the most important pre-condition administrative license in mergers and acquisitions, merger control notification could have serious influence over a transaction. On the one hand, companies need to arrange notifications reasonably and submit them early to avoid the review process affecting the transaction timeline. On the other hand, due to the uncertainty of the review outcome, the significant intervention in the transaction process caused by investigations into failures to notify, and the decisive impact of the review decision on whether the transaction can proceed as scheduled, in practice, when facing transactions that are against their will (often hostile takeovers), companies often use the merger control notification review process as a common method to prevent the implementation of transactions.

Generally, when companies seek to prevent the implementation of a transaction through the notification process, they often adopt the approach of reporting failures to notify to the enforcement authority, prompting investigations into whether the transaction meets the notification thresholds, whether it has been implemented, and whether it raises competitive concerns. For example, in 2019, semiconductor distributor WT Microelectronics publicly announced its intention to acquire a 30% stake in WPG Holdings, which was strongly opposed by WPG Holdings. Subsequently, the China Mobile Alliance reported the transaction to SAMR. Although in most cases SAMR does not necessarily determine that the relevant transaction constitutes a failure to notify, let alone directly prohibit the transaction, through the mechanism of reporting failures to notify, companies can often achieve multiple objectives, including: (a) delaying the implementation of the transaction; (b) preventing the buyer from further acquisitions; and (c) prompting the buyer to make commitments to the enforcement authority not to acquire control. For instance, in the aforementioned WPG Holdings case, under the supervision of the enforcement authority, WT Microelectronics publicly committed that the transaction was merely a financial investment and that it would not acquire control over WPG Holdings.⁴

In the Tobishi case, as Simcere had not yet implemented the acquisition of Tobishi at the time of notification, Tobishi was unable to intervene in the transaction process by reporting a failure to notify and thus chose to proactively file a notification and seek SAMR’s prohibition of the transaction. However, as demonstrated by this case, whether viewed from the perspective of legal provisions, judicial practice, or enforcement practice, while proactively submitting a notification may delay the transaction process, the intention to compel SAMR or the courts to directly block the transaction through such means remains uncertain.

B. Legality Analysis: Balancing Substantive Review and Judicial Deference

A significant distinction between administrative litigation and civil litigation lies in the principle of judicial deference in administrative litigation: judicial bodies should not substitute themselves for administrative agencies in making administrative decisions and should respect the exercise of powers within the scope of discretion granted by law to administrative authorities. Based on this principle, Article 6 of the Administrative Litigation Law provides: “People’s courts shall review the legality of administrative acts in hearing administrative cases.” In this case, the Beijing Intellectual Property Court’s identification of the key issues in dispute also focused on the legality of the relevant acts, including the standing of the plaintiff, whether there were factual errors, whether the method of conditional approval was itself lawful, and whether the remedies package attached as a condition was lawful.

During the trial, the court analyzed SAMR’s assessment logic and criteria to determine whether the administrative act was lawful. This was particularly evident in the examination of the fifth issue in dispute, namely, “whether it was lawful for SAMR to adopt the remedies package proposed by Simcere as the restrictive conditions attached to the approval of the concentration in question.” The court evaluated the imposed conditions from the perspectives of effectiveness, feasibility, and timeliness. Specifically, in analyzing effectiveness, the court first weighed the pro-competitive and anti-competitive effects, considering how the restrictive conditions addressed the core competitive concern of input foreclosure in the transaction and how the elimination of double marginalization could generate efficiency gains. It then conducted a comprehensive analysis of market entry and the role of alternative options, carrying out a focused and thorough evaluation in light of the specifics of the transaction.

IV. The Boundary Between Administrative Review and Judicial Review

In the Tobishi case, the boundary between administrative review and judicial review was clearly demonstrated.

First, as in all administrative litigations, the burden of proof is reversed: the defendant (i.e., the enforcement authority), rather than the plaintiff, is required to provide evidence that support their administrative acts, including explanations of the review procedures, details of the collection of opinions from relevant parties, and competitive impact assessment analyses, to demonstrate that the administrative act has a solid legal and rational basis.

Second, the court reviews only the legality of the administrative act but not substantive issues. Based on the facts established in the enforcement action, the court examines whether the procedures followed by the enforcement authority were lawful (for example, whether statutory procedures such as hearings were observed), whether the content of the decision was lawful (for example, whether conditions could be imposed on transactions with competitive impacts), and whether the authority’s consideration of competitive impacts was comprehensive. This approach is consistent with the EU practice that the purpose of judicial review is to assess the legality of actions taken by the European Commission. Courts in the EU may annul decisions but generally do not directly adjudicate on substantive issues, nor can they substitute their own judgment for the Commission’s discretion.⁵ In contrast, in the United States, courts apply a de novo standard of judicial review, meaning that they do not give special deference to the factual findings of the enforcement agencies and may conduct a comprehensive substantive reassessment of whether a merger transaction violates antitrust laws, rendering an independent judgment.⁶

V. A Comparative Perspective on Judicial Remedies for Conditional Merger Control Decisions in the EU and the US

In China, the recourse for a conditional merger control decision is to seek administrative reconsideration, and, if unsuccessful, to initiate judicial proceedings. In major foreign antitrust jurisdictions represented by the European Union and the United States, different paths are applied.

A. European Union

Merger control decisions and related procedural acts of the European Commission are subject to judicial review. Undertakings or other interested parties may file an appeal with the General Court within two months after the issue of the administrative decision. To contest the judgment of the General Court, they may further appeal to the Court of Justice of the European Union. While national courts also have the power of judicial review over merger decisions by their respective national competition authorities, their role is relatively limited. Acts that can be challenged are those that are legally binding on the parties and substantially affect their legal position, including final decisions and intermediate decisions that impact the rights and obligations of the undertakings. Once the court annuls a decision of the European Commission, the Commission must re-examine the merger case, which may also involve claims for damages (although this is rare in practice).⁷

According to the Treaty on the Functioning of the European Union (TFEU), only interested parties with direct and individual concern regarding the review decision may bring an appeal before the EU courts.⁸ “Direct concern” means that the decision at issue directly affects the legal position of the party, and the implementation of the decision does not involve the discretion of any enforcement authority.⁹ “Individual concern” refers to the situation where the party is affected by the decision due to certain unique attributes or specific circumstances that differentiate it from others.¹⁰ This provision allows two categories of parties to bring appeals against the European Commission’s merger control decisions: first, natural or legal persons as parties subject to the administrative act, i.e., the merger parties; and second, third parties with direct and individual concern. The standing of merger parties as plaintiffs is relatively evident, whereas whether third parties have direct and individual concern depends on the interpretation of the EU courts. In Air France v. Commission, the General Court of the EU held that, as a competitor challenging the merger between British Airways and Dan Air, Air France’s special relationship with the merging parties and its status compared to other competitors were sufficient for it to be considered as having “direct and individual concern.”¹¹ In the Petrolessence case, Petrolessence, as a potential purchaser under a divestiture requirement in the TotalFina/Elf Aquitaine case, lost its eligibility as a purchaser after the European Commission concluded that it could not “maintain or develop effective competition” in the relevant market. Petrolessence filed an appeal, and the General Court of the EU recognized its standing.¹² In the ARD case, the court held that when a company with a dominant position strengthens its position through a merger, even if the company operates only in an adjacent upstream or downstream market, it may, under certain circumstances, file a lawsuit to annul the decision.¹³ In addition to these situations, other third parties with specific procedural rights (such as the right to submit comments) may also file a lawsuit before the EU courts if those rights are not respected.

The cases accepted by the EU courts must concern reviewable acts, which are acts that are legally binding on the parties and substantially affect their legal position. The courts assess the legality of the European Commission’s acts. Specifically, under Article 263 of the TFEU, the review of the European Commission’s merger decisions may be based on four main grounds: (a) lack of competence or jurisdiction; (b) infringement of essential procedural requirements; (c) infringement of the Treaties or of any rule of law relating to their application; and (d) misuse of powers.

In terms of procedural violations, the most common grounds invoked by undertakings are infringements of their rights of defense, such as not being adequately informed of the specific objections raised by the Commission or not being given a reasonable opportunity to respond. In the Schneider Electric SA v. Commission case concerning the proposed merger between Schneider Electric and Legrand,¹⁴ the European Commission raised the so-called “buttressing” theory of competitive concerns for the first time in its final prohibition decision, arguing that the transaction would strengthen Schneider’s and Legrand’s respective positions in upstream and downstream markets in France. However, this theory had not been disclosed in the statement of objections, and the undertakings were not given the opportunity to respond to these concerns. The General Court of the EU ruled that the Commission had failed to respect Schneider’s rights of defense, constituting a procedural violation, and annulled the prohibition decision on that basis.

In terms of substantive review, although the courts do not intervene in the economic assessments themselves, they examine whether the European Commission has relied on a body of evidence that is accurate, reliable, consistent, and sufficient to support its conclusions. For example, in the Airtours/First Choice case,¹⁵ the European Commission argued that the merger of the three major operators in the UK short-haul package holiday market would create an oligopolistic structure and could lead to coordinated behavior restricting competition. However, the court found that the Commission had failed to meet the legal standard of proof, particularly by not sufficiently demonstrating the three key conditions required for coordination: whether there was sufficient market transparency among the undertakings, whether there was a credible deterrence mechanism, and whether the coordination outcome had external stability. The court further criticized the Commission’s economic analysis as lacking a factual basis and constituting a manifest error, and consequently annulled the prohibition decision. In the Tetra Laval/Sidel case,¹⁶ Tetra Laval planned to acquire Sidel, a manufacturer of PET plastic bottle blow-molding equipment, which constituted a conglomerate merger. The European Commission argued that the transaction could enable Tetra to leverage its dominant position in the liquid carton packaging market to implement a leverage strategy in the adjacent PET packaging equipment market, using tactics such as tying and bundling, thereby weakening competition. However, the General Court held that the Commission had failed to demonstrate with sufficient, reliable, and consistent evidence that such anti-competitive effects were “reasonably probable” in the foreseeable future. The court found that the Commission’s conclusions relied excessively on hypothetical chains of causation without a solid factual and economic analysis foundation, constituting a manifest error of assessment.

In cases involving conditional approvals, the court may review the legality of the Commission’s refusal to accept commitments proposed by the undertakings, as well as assess the reasonableness of the Commission’s acceptance of commitments. For instance, in the Gencor case,¹⁷ which involved a merger between Gencor and Lonrho in the South African platinum metals market, Gencor proposed a commitment to maintain the capacity of a particular plant as a remedy to address the Commission’s concerns over the creation of a duopolistic market structure. The Commission found that this behavioral commitment was insufficient to address the potential structural issues in the market and therefore rejected it. The General Court upheld the Commission’s position, stating that while behavioral remedies can be legitimate, the proposed commitment in this case did not effectively address the competition risks identified by the Commission, and the Commission had legitimate grounds for rejecting it. Similarly, in the Cementbouw case,¹⁸ although the General Court ultimately dismissed the appeal, it confirmed that even if the remedies were proposed voluntarily by the undertaking, the undertaking still had the right to claim that the Commission had made errors or misjudgments in assessing the reasonableness and appropriateness of the proposed commitments.

Therefore, while the courts respect the discretion of the European Commission in its economic assessments, the Commission’s conclusions must still be based on sufficient, reasonable, and persuasive evidence, or they risk being annulled by the courts.

B. United States

In the United States, merger review is jointly enforced by the Department of Justice (DOJ) and the Federal Trade Commission (FTC). As the DOJ itself does not have the authority to grant conditional approvals, it must reach a “consent decree” with the merging parties or directly submit the matter for review by a federal district court, where the court’s review is limited to assessing whether the agreement serves the public interest and whether it can resolve the competitive concerns raised in the DOJ’s complaint.¹⁹ In contrast, the FTC can issue conditional approval decisions through internal administrative procedures, which take effect without the need for federal court review.

The DOJ’s “consent decree” with the merging parties is formed through negotiation and voluntary agreement, and typically, the merging parties are not permitted to seek remedies through appeal. If a third party believes that the merger is anti-competitive and that the consent decree is insufficient to address competitive concerns, it may file a separate private lawsuit.²⁰ For FTC administrative decisions, if the merging parties are dissatisfied, they may seek judicial review by filing an appeal with the federal court of appeals, with a further right of appeal to the U.S. Supreme Court. However, similarly, third parties cannot directly challenge the FTC’s administrative decisions.²¹ Likewise, judicial decisions rendered upon review generally may only be appealed by parties to the litigation, while third parties must seek remedies through separate private lawsuits. In the field of private litigation, parties harmed by antitrust violations may bring civil lawsuits before federal district courts to challenge allegedly unlawful mergers, including competitors, consumers, and upstream or downstream market participants. U.S. courts determine standing on a case-by-case basis, assessing whether the party has suffered antitrust harm as a result of the merger. For example, in the Brunswick case, the plaintiff’s claim was dismissed after the court found that the plaintiff was harmed by increased market competition following the merger rather than by an antitrust injury.²² However, for the target company being acquired, U.S. courts generally find that as a beneficiary of the potentially monopolistic conduct post-merger, it does not meet the condition of suffering an “antitrust injury” and is therefore denied standing as a plaintiff.

Compared to the legality review by EU courts, which primarily examine manifest errors in procedure, fairness, and factual basis, U.S. courts apply a de novo standard of judicial review, meaning courts do not give deference to the factual findings of enforcement agencies (such as the FTC or DOJ).²³ Courts may conduct a comprehensive substantive reassessment of whether a merger violates antitrust laws, making independent judgments after hearing arguments from both parties and establishing the factual record, including independent decisions on key substantive issues such as market definition, competitive effects, and the effectiveness of remedies.

In the Illumina, Inc. v. FTC case, the FTC challenged Illumina’s acquisition of cancer screening company Grail, arguing that the transaction would substantially lessen competition and requiring Illumina to divest Grail. Illumina appealed to the U.S. Court of Appeals for the Fifth Circuit, contending that the FTC’s structure, including provisions related to the removal of commissioners and the “combined prosecutorial and adjudicatory functions” of its administrative procedures, violated the constitutional separation of powers. The Fifth Circuit, after a substantive review of the evidence presented by both parties, upheld the FTC’s conclusion that the transaction had anti-competitive effects. The court found that the FTC had met its burden of proof in demonstrating that the Illumina-Grail merger “may substantially lessen competition,” and that Illumina had failed to provide a viable rebuttal demonstrating that its proposed measures could mitigate the potential for technological foreclosure and harm to innovation. Regarding the constitutional challenges, the court held, based on precedent, that the FTC’s structure as a traditional multi-member independent agency was consistent with constitutional requirements. However, the court identified a legal error in the FTC’s application of the law, noting that the FTC had applied the incorrect legal standard when assessing the impact of the “Open Offer.” The court stated that the FTC should have considered the offer during the liability phase of the proceedings rather than during the remedy phase, and it required the FTC to reassess the impact of the “Open Offer” under the correct standard. In this case, the court held that the FTC was required to make a prima facie showing that the merger may substantially lessen competition, and once the FTC met this initial burden, the burden of proof shifted to Illumina to demonstrate that its measures would effectively alleviate the anti-competitive concerns arising from the transaction.

VI. Outlook: Advancing Administrative Enforcement and Corporate Remedies Through Antitrust Judicial Review in China

This case is not an isolated judicial proceeding but is closely tied to the review practices of antitrust regulatory authorities and the rights and remedies available to companies, with the potential to exert a profound impact on the future conduct of antitrust regulatory reviews in China as well as on companies’ judicial remedy strategies, which could affect all companies with business in China.

From the perspective of regulatory review, this case is expected to promote cautious and prudent review by administrative authorities and to enhance the transparency of review decisions. Specifically, in this case, the court conducted a detailed analysis of SAMR’s internal logic in attaching conditions to the review decision, the competitive effects, and the rationale behind the fifth condition to assess whether the reasoning was justified. However, in China, the reasoning provided in certain review decisions is relatively brief, making it difficult for stakeholders and the public to fully understand the basis for such decisions. Therefore, if future conditional approval decisions in merger control cases can include specific explanations regarding the objectives of the imposed conditions and their competitive impacts, it will undoubtedly contribute positively to improving the understandability and acceptance of review decisions.

From the perspective of corporate remedies, as no enterprise had previously initiated administrative litigation against a domestic merger control review decision in China, companies have faced considerable uncertainty in practice, lacking clear legal precedents or practical guidelines regarding the key points in such litigation and the issues to be noted during the remedy process. This gap has often left companies without a clear path to safeguard their rights when facing unfavorable merger control decisions. This case has clarified several core issues in administrative litigation concerning merger control reviews, providing companies with a clear direction and perspective for seeking judicial remedies, while also triggering widespread discussion and multidimensional reflection within the practice community on deeper issues such as the boundaries of the merger control review system and the mechanisms for aligning administrative regulation with judicial remedies.

1. In this case, the Beijing Intellectual Property Court used the term “notifying party” instead of “transaction party” in its judgment. However, in its analysis of standing, the court did not consider whether the party had the obligation to notify or was the actual notifying party as a prerequisite for standing. Tobishi in this case was not the party obligated to notify, and in similar cases, the target company does not necessarily submit the notification as the notifying party. Therefore, it is understood that whether a party is the notifying party does not affect its standing to sue, and thus the term “transaction party” is used in this analysis.
2. See the section “II. Civil Litigation Concerning Merger Control” below.
3. In such cases, the merger conduct must meet the legal standard for constituting an unlawful anti-competitive agreement or abuse of market dominance. The EU enforcement authorities have attempted to review mergers under Articles 101 and 102 of the TFEU; see Zhisong Deng and Jianmin Dai, “Navigating Below-Threshold Merger Regulations: A Comparative Study of China, the EU, the UK, and the US,” https://www.lexology.com/library/detail.aspx?g=a6d7ade4-2482-4a06-a64a-347e973aa885.
4. WT Microelectronics made the “Four No’s and One Yes” commitment:

(a) WT would attend and vote at WPG Holdings’ shareholders’ meetings convened according to law upon notification;

(b) After acquiring the shares of WPG Holdings, WT would independently exercise its shareholder rights without agreeing with any third party to jointly exercise voting rights;

(c) After acquiring the shares, WT would not solicit proxies to obtain voting rights exceeding its shareholding when convening shareholders’ meetings;

(d) WT would maintain its shareholding in WPG Holdings at no more than 30% and would not acquire additional WPG shares in the capital market; and

(e) WT would not nominate or run for positions on WPG Holdings’ board of directors.

See https://www.esmchina.com/news/6285.html.

5. See Judicial review of merger decisions: An overview of EU and national case law, https://awards.concurrences.com/IMG/pdf/32._judicial_review_of_merger_decisions_an_overview_of_eu_and_national_case_law.pdf?56031/f43caabd10f25efda8d2560533f9aa91c2adff3988f32606ebc80cab7d3428f0
6. See https://www.justice.gov/jmd/ls/antitrust-procedures-and-penalties-act-tunney-act-pl-93-528
7. See Europe Competition: Merger control procedures, https://competition-policy.ec.europa.eu/system/files/2021-02/merger_control_procedures_en.pdf.
8. Article 263(4) TFEU: “Any natural or legal person may… institute proceedings against an act addressed to that person or which is of direct and individual concern to them, and against a regulatory act which is of direct concern to them and does not entail implementing measures.”
9. Case C-386/96 P – Dreyfus v. Commission
10. Case 25/62, Plaumann v. Commission
11. Air France v. Commission (Case T-2/93)
12. Petrolessence & SG2R v. Commission (Case T-342/00)
13. Arbeitsgemeinschaft der offentlich-rechtlichen Rundfunkanstalten der Bundesrepublik Deutschland (ARD) v. Commission (Case T-158/00)
14. Schneider Electric SA v Commission (Case T-351/03)
15. Airtours v Commission (Case T-342/99)
16. Tetra Laval v Commission (Case T-5/02)
17. Gencor v Commission (Case T-102/96)
18. Cementbouw Handel & Industrie v Commission (Case T-T-282/02)
19. See https://www.ftc.gov/system/files/attachments/us-submissions-oecd-2010-present-other-international-competition-fora/standard_of_review_us-oecd.pdf.
20. For a proposed merger, public enforcement and private actions can proceed in parallel, meaning the DOJ and FTC may challenge the proposed transaction without precluding private parties from bringing lawsuits over the same transaction.
21. 15 U.S. Code § 45 (c)
22. Brunswick Corp v. Pueblo Bowl – O -Mat, Inc, 429 U.S. 477, 97 S. Ct.
23. See https://globalcompetitionreview.com/guide/the-guide-merger-remedies/fifth-edition/article/remedies-in-the-context-of-multi-jurisdictional-mergers