What is horizontal competition? There is no clear definition in relevant laws and regulations in China. With regard to horizontal competition, the most common expression is that a company is engaged in the same or similar business as its controlling shareholder, actual controller and enterprises controlled by it, and the two parties constitute or may constitute a direct or indirect competitive relationship. From the above statement, we can abstract three sub-concepts for further analysis: first, the subject (who competes with); Second, the object (competitive content); Third, competitiveness (whether there is competition). Compared with external competition, horizontal competition can also be called "internal competition" or "self-competition", and the subjects of competition are the controlling shareholders, actual controllers and controlled enterprises of the company. In the early stage, China's relevant laws and regulations mostly described the subject of horizontal competition as "affiliated enterprises" or "related parties", but now they are expressed as controlling shareholders, actual controllers and other enterprises controlled by them. Expanded the window guidance of the CSRC, and its main body greatly exceeded the scope of relevant regulations.
China's laws and administrative regulations do not prohibit horizontal competition. Relevant regulations prohibiting or restricting horizontal competition are mostly low-level departmental rules and normative documents (such as those of CBRC, CIRC and CSRC). The author has noticed that some commentators equate non-competition with horizontal competition, and interpret the non-competition obligation of directors, supervisors and senior managers (hereinafter referred to as senior managers) in relevant laws and regulations as restricting or prohibiting horizontal competition, which is actually very wrong. The company law does not prohibit competition in the same industry, but restricts competition between executives and companies. Horizontal competition and non-competition are two different legal concepts. The focus of horizontal competition regulation is the abuse of control rights by major shareholders (and their affiliates), while the focus of non-competition regulation is the abuse of trust rights by executives (violation of loyalty obligations to the company), which is essentially different.
Solution According to the audit requirements of the CSRC, horizontal competition must be eliminated, and it must be completely and cleanly eliminated, leaving no hidden dangers. The commonly used solutions in practice are as follows: 1, Guan: cancel the enterprises that form horizontal competition with the enterprises to be listed (in practice, most of them are enterprises without actual operation).
2. Merger: The enterprises to be listed absorb and merge the enterprises that are competitive with themselves in the same industry (in practice, most of the absorbed enterprises are enterprises with acceptable operating conditions, and enterprises with poor operating performance are excluded from this method because they will affect the performance of listed companies).
3. Transfer: the controlling shareholder (or actual controller) transfers the equity or assets and business of the enterprise that it holds in horizontal competition with the enterprise to be listed to a third party (in practice, the transferred enterprise is often an enterprise with poor management and huge debts. Many of them are fake, because no one wants to take over such enterprises at all.
Some critics also put forward the following solutions: 4. Settlement by agreement: the listed company will sign relevant agreements (such as market segmentation agreement). ) with enterprises that have horizontal competition, so as to divide the market scope and product structure of enterprises to be listed and competitors, and achieve the purpose of eliminating horizontal competition (the validity of the agreement is in doubt, and it seems to be suspected of violating the competition law).
5. Entrust operation: Entrust the business that has horizontal competition with listed companies to listed companies (some listed companies have adopted this method to eliminate horizontal competition).
6. Written commitment: The controlling shareholder (including the actual controller and related parties) unilaterally makes a written commitment or signs a written agreement to the company to be listed, and puts forward specific measures to avoid horizontal competition and conflicts of interest.
Among the above solutions, the CSRC is most inclined to adopt the first and second methods, and other methods are difficult to satisfy or reassure the CSRC. In practice, in order to solve and eliminate horizontal competition and meet the listing requirements, some companies to be listed often do whatever it takes or even find themselves in a dilemma. Some enterprises have to give up or sacrifice the company's long-term development strategy, thus embarking on a short-term and utilitarian road.
The author believes that it is in line with China's current national conditions and actual needs to appropriately restrict horizontal competition, but it is too late to go to extremes, otherwise it will only be counterproductive. (This column is contributed by Haihua Yongtai Law Firm)