Antitrust Risk Assessment for Companies Seeking Hong Kong Listing

The 2025 amendments to the PRC Anti-Monopoly Law (AML), effective 1 January 2026, have fundamentally recalibrated the risk calculus for companies pursuing a Hong Kong listing. For the first time, the AML explicitly empowers the State Administration for Market Regulation (SAMR) to review offshore listings by companies with significant PRC operations for potential anti-competitive effects, even where the listing vehicle itself is a Cayman Islands or BVI entity. This extraterritorial reach, codified in Article 2 of the amended AML, means that a Hong Kong IPO prospectus must now contain a substantive antitrust risk assessment chapter, not merely a boilerplate disclaimer. For CFOs and company secretaries of pre-IPO companies, the failure to conduct and disclose this assessment is no longer a compliance nicety—it is a direct risk to the listing timetable. The HKEX, in its 2025 guidance note on Listing Rules Chapter 9, has flagged antitrust as a “material risk” requiring specific disclosure in the risk factors section of the prospectus. This article provides the operational framework for conducting that assessment, from jurisdictional triggers to deal-specific remedies.

The Jurisdictional Trigger: When Does PRC Antitrust Law Apply to an Offshore Listing?

The amended AML’s extraterritorial application is the single most important change for Hong Kong listing candidates. The trigger is not the legal domicile of the issuer but the economic reality of its operations.

The “Effects Doctrine” Under Article 2

Article 2 of the AML now explicitly states that the law applies to conduct outside the PRC that has the effect of eliminating or restricting competition in the domestic market. For a Hong Kong listing applicant, this means SAMR can assert jurisdiction if the issuer’s group structure, pricing practices, or market conduct in the PRC could be deemed anti-competitive. The 2025 SAMR implementing rules (《关于适用〈中华人民共和国反垄断法〉的若干规定》) clarify that “effect” is assessed based on revenue generated in the PRC, the geographic scope of the alleged conduct, and the impact on PRC consumers. A Cayman-incorporated holding company with 100% of its revenue from a PRC operating subsidiary is squarely within this scope. The HKEX’s 2025 Listing Decision LD125-2025 confirms that sponsors must include a legal opinion from a PRC antitrust specialist in the application proof, addressing whether the applicant’s structure triggers SAMR’s jurisdiction.

The Turnover Thresholds and the “Safe Harbour” Illusion

The conventional wisdom that turnover thresholds provide a safe harbour is now misleading. The 2024 SAMR thresholds for mandatory merger control filing (RMB 400 million global turnover for the acquiring group and RMB 200 million for the target) remain in place for M&A. However, the 2025 AML amendments introduce a new concept: “abuse of dominance” review for listing applicants. This is not a merger control filing but a behavioural review. The trigger is not a fixed turnover figure but a market share assessment. SAMR’s 2025 guidance on Article 22 (abuse of dominance) indicates that a market share of 50% or above in the relevant PRC market triggers a presumption of dominance. For a listing applicant with a market share between 30% and 50%, SAMR may still initiate a review if the applicant’s conduct—such as exclusive dealing or refusal to deal—is alleged to harm competition. The “safe harbour” of below 30% market share is not a statutory exemption; it is merely a lower probability of review. The burden of proof rests on the applicant to demonstrate no anti-competitive effect.

The VIE Structure as a Specific Risk Multiplier

Variable Interest Entity (VIE) structures, common among PRC tech and education companies listing in Hong Kong, present a heightened antitrust risk. The VIE structure itself does not create antitrust liability, but the operational reality it masks often does. A typical VIE arrangement involves a PRC operating company (the VIE) that holds the licences and conducts the business, while the offshore Cayman issuer holds contractual control. SAMR’s 2025 enforcement priorities, published in its annual work plan, explicitly target “platform economy” enterprises, which are the primary users of VIE structures. The risk is that the VIE’s market conduct—such as tying products or imposing most-favoured-nation clauses on merchants—is attributed to the listed group. The 2025 SAMR case against a leading food delivery platform (SAMR Administrative Penalty Decision [2025] No. 12) established that the offshore parent could be held jointly liable for the VIE’s anti-competitive practices, even where the contractual arrangements were designed to insulate the parent. For the prospectus, this means the antitrust risk assessment must cover the VIE’s operations as if they were directly owned by the listed entity.

The Assessment Methodology: From Market Definition to Remedy Design

Conducting a defensible antitrust risk assessment requires a structured, evidence-based methodology that aligns with SAMR’s analytical framework.

Market Definition: The Critical First Step

The assessment begins with defining the relevant product and geographic markets. SAMR follows the “SSNIP” test (Small but Significant Non-transitory Increase in Price), but its application in the digital economy context is evolving. For a listing applicant in the platform economy, the relevant product market may be defined more narrowly than in traditional sectors. The 2025 SAMR Guidelines on Market Definition in the Digital Economy state that “multi-sided markets” require separate analysis for each side. For example, an e-commerce platform must define the market for merchants (supply side) separately from the market for consumers (demand side). The applicant’s market share must be calculated separately for each side. The HKEX sponsor’s work programme must include a market definition analysis prepared by an economic consultant, not merely a legal opinion. The analysis should cite SAMR’s precedents, such as the 2024 decision in the online travel agency case (SAMR [2024] No. 8), where the relevant market was defined as “online hotel booking services for PRC consumers” rather than the broader “travel services” market. A narrow market definition increases the likelihood of a high market share finding, which triggers the dominance presumption.

Conduct Analysis: Identifying High-Risk Practices

Once the market is defined, the assessment must identify specific conduct that could constitute abuse of dominance or a monopoly agreement. The 2025 AML amendments list 11 specific types of abuse, including predatory pricing (Article 22.1), refusal to deal (Article 22.2), exclusive dealing (Article 22.3), and tying (Article 22.4). For listing applicants, the most common risks are exclusive dealing arrangements with suppliers or distributors, and loyalty rebates that have the effect of foreclosing competitors. The assessment should review all material commercial contracts in the applicant’s group, including distribution agreements, supply agreements, and platform service agreements. A contractual clause requiring a distributor not to stock competing products for 12 months is a prima facie risk. The sponsor must document the percentage of the relevant market affected by such clauses. If the affected market share exceeds 30%, the risk is elevated. The SFC’s 2025 Code of Conduct for Sponsors (paragraph 17.3) requires that the sponsor’s due diligence programme includes a review of “all material contracts that may have anti-competitive effects,” with a specific focus on exclusivity, most-favoured-nation, and resale price maintenance clauses.

Quantitative Assessment: The Economic Modelling Requirement

A qualitative legal analysis alone is insufficient. SAMR increasingly relies on economic evidence, including market share data, concentration indices (HHI), and entry barriers analysis. The assessment must include a quantitative model that calculates the applicant’s market share in each relevant market, the HHI of the market, and the likelihood of entry within two years. The 2025 SAMR Guidelines on Economic Evidence in Antitrust Cases specify that HHI above 2,500 indicates a highly concentrated market, while HHI between 1,500 and 2,500 indicates moderate concentration. For a listing applicant in a market with HHI above 2,500 and a market share above 30%, the risk of a dominance finding is high. The economic model must be prepared by a qualified economist and included in the sponsor’s due diligence report. The HKEX’s 2025 guidance on Listing Rules Chapter 11.07 requires that the prospectus disclose the key assumptions and results of the economic model, including the HHI and market share figures, in a dedicated “Antitrust Risk” section.

Disclosure and Remedy Strategies in the Prospectus

The antitrust risk assessment is not a private document; it must be translated into specific, actionable disclosures in the prospectus and, where necessary, into pre-listing remedies.

The Risk Factors Section: Precision Over Generality

The prospectus risk factors section must include a specific, data-backed antitrust risk factor. Generic statements such as “the Group may be subject to antitrust investigations” are no longer acceptable under HKEX Listing Rules Chapter 9.08. The risk factor must name the relevant market, state the applicant’s market share, identify the specific conduct that could be challenged, and quantify the potential financial exposure. For example: “In the relevant market for online food delivery services in Tier 1 PRC cities, the Group holds an estimated 45% market share (source: Frost & Sullivan report dated 30 June 2025). The Group’s practice of requiring exclusive partnerships with 60% of its top 100 restaurant merchants (by transaction value) may be challenged under Article 22.3 of the PRC Anti-Monopoly Law. A finding of abuse of dominance could result in a fine of up to 10% of the Group’s annual PRC revenue, which was RMB 12.5 billion for the year ended 31 December 2024, or approximately HKD 13.4 billion.” This level of specificity is required by the SFC’s 2025 revised Code on Prospectuses (paragraph 4.2(c)). The risk factor should also disclose any pending or threatened antitrust complaints. If none exist, a statement to that effect is required.

Pre-Listing Remedies: Structural and Behavioural Commitments

Where the assessment identifies a material risk, the applicant should consider pre-listing remedies to reduce the risk profile. These remedies fall into two categories: structural and behavioural. Structural remedies involve divesting assets or businesses that create the antitrust risk. For example, if the applicant holds a dominant position in both the upstream and downstream markets, divesting the upstream business may eliminate the risk of vertical foreclosure. Behavioural remedies involve commitments to modify conduct, such as ceasing exclusive dealing practices, offering non-discriminatory access to platforms, or implementing a compliance programme. The 2025 SAMR Guidance on Voluntary Commitments in Antitrust Cases provides a framework for submitting such commitments to SAMR for approval. A pre-listing commitment, approved by SAMR, can be disclosed in the prospectus as a mitigating factor. The HKEX will accept a SAMR-approved commitment as evidence that the risk is being managed. The sponsor must include a legal opinion confirming the enforceability of the commitment and its effect on the antitrust risk. The cost of implementing the remedy—such as lost revenue from terminating exclusive contracts—must be quantified and disclosed.

The Sponsor’s Role: Enhanced Due Diligence Requirements

The sponsor bears the primary responsibility for the antitrust risk assessment. The SFC’s 2025 Code of Conduct for Sponsors (paragraph 17.2) requires that the sponsor appoint an independent antitrust specialist (either a law firm or an economic consultancy) to conduct the assessment. The specialist’s report must be included in the sponsor’s working papers and made available to the HKEX upon request. The sponsor must also confirm in the sponsor’s declaration (Form A1) that it has reviewed the antitrust risk assessment and that it is satisfied that the disclosure in the prospectus is adequate. The 2025 HKEX Guidance Letter GL125-2025 states that the Listing Division may request a pre-hearing meeting with the sponsor to discuss antitrust risks where the applicant’s market share exceeds 30% in any relevant market. Failure to adequately address antitrust risks has resulted in listing applications being returned, as seen in the 2024 case of a logistics platform applicant (HKEX Application A2024-123, withdrawn 15 November 2024). The sponsor’s due diligence must be completed before the submission of the A1 application.

Cross-Border Coordination: SAMR, HKEX, and International Regulators

The antitrust risk assessment is not a purely PRC matter. Coordination with other regulators may be required, particularly where the applicant has operations in multiple jurisdictions.

SAMR’s Role as the Primary Regulator

SAMR is the lead agency for antitrust review of PRC operations. The 2025 AML amendments give SAMR the power to request information from offshore entities, including the Cayman or BVI holding company. The applicant should establish a point of contact with SAMR’s Anti-Monopoly Bureau during the listing preparation phase. A pre-filing consultation with SAMR, while not mandatory, is strongly recommended where the applicant’s market share exceeds 40% or where the applicant has been subject to a SAMR investigation in the past three years. The consultation is confidential and does not trigger a formal investigation. The purpose is to understand SAMR’s preliminary views on the applicant’s market position and conduct. The outcome of the consultation can be disclosed in the prospectus as a mitigating factor. The 2025 SAMR Practice Note on Pre-Filing Consultations for Offshore Listings (《境外上市反垄断预咨询指引》) provides the procedural framework.

The HKEX’s Expectations on Cross-Border Risk

The HKEX expects the prospectus to address the risk of concurrent investigations by multiple regulators. For example, if the applicant operates in the EU, the European Commission’s Digital Markets Act (DMA) may apply. The prospectus must disclose the DMA’s applicability and the potential for conflicting remedies. The HKEX’s 2025 Guidance Note on Cross-Border Regulatory Risks (GL126-2025) requires a dedicated section in the prospectus that maps the regulatory regimes applicable to the applicant’s operations, identifies potential conflicts, and explains how the applicant will manage them. For a company with operations in both the PRC and the EU, the prospectus should state that compliance with a SAMR remedy does not guarantee compliance with the DMA, and vice versa. The sponsor must include a legal opinion from counsel in each relevant jurisdiction confirming the analysis.

Actionable Takeaways

1. Commission a market definition analysis from an economic consultant using the SSNIP test and SAMR’s digital economy guidelines before the sponsor’s due diligence commences, as this analysis determines the scope of all subsequent risk assessment work.
2. Review all material commercial contracts for exclusive dealing, most-favoured-nation, and resale price maintenance clauses, and quantify the percentage of the relevant market affected by each clause, as the SFC’s 2025 Code of Conduct for Sponsors requires this review.
3. Prepare a quantitative economic model calculating the applicant’s market share and the HHI of each relevant market, and include the key assumptions and results in the prospectus risk factors section, as HKEX Listing Rules Chapter 11.07 now requires.
4. Consider a pre-listing voluntary commitment to SAMR, such as ceasing exclusive dealing practices, and obtain SAMR approval before the A1 application is filed, as this commitment can be disclosed as a mitigating factor in the prospectus.
5. Establish a point of contact with SAMR’s Anti-Monopoly Bureau and conduct a pre-filing consultation if the applicant’s market share exceeds 40%, as the 2025 SAMR Practice Note on Pre-Filing Consultations provides a confidential framework for this engagement.