Uni-President Enterprises Corporation & Wei Lih Food Industrial Co., Ltd.

Case:

Supreme Administrative Court overruled administrative litigation filed by Uni-President over the FTC's decision

Key Word(s):

Overall economic benefit, instant noodles, market concentration

Reference:

Supreme Administrative Court Judgement(2013) Pan Tzu No. 500

Industry:

Noodle Manufacturing (0892)

Relevant Law(s):

Article 12 of the Fair Trade Law

Summary:

1. The appellant (Uni-President Enterprises Corporation) filed a pre-merger notification with the appellee (FTC) twice in 2008 and 2010 respectively regarding its intention to merge with Wei Lih Food Industrial Co., Ltd. (hereinafter referred to as Wei Lih Foods) through indirect holding of over one third stocks of Wei Lih Foods. Acting according to Article 12 (1) of the Fair Trade Law, the appellee prohibited the merger on the grounds that disadvantages from competition restrictions thereof incurred could outweigh the overall economic benefit and informed the appellant of the decision via Decision Kung Jie Tzu No. 097005 dated September 10, 2008 and Decision Kung Jie Tzu No. 099003 dated September 8, 2010 respectively. Finding the decision unacceptable, the appellant appealed and filed administrative litigation. Both were overruled and the appellant therefore appealed to the Supreme Administrative Court.

2. The Fair Trade Commission Disposal Directions(Guidelines) on Handling Merger Filings established by the appellee by making reference to practices and precedents of competition authorities of different countries are a reasonable interpretation of the concept of market specified in Article 11 of the Fair Trade Law achieved in accordance with the statutory authority conferred on the appellee. There is no inconsistency with the merger regulations set forth in the same law or any fabricated stipulation to restrict people from exercising their rights. Hence, the said guidelines are in compliance with the principle of legal reservation. In the meantime, the merger being a horizontal one, it would reduce the number of businesses in the current market. Besides eliminating existing competition, it could also increase market concentration. If an enterprise obtained market power through such a merger, it could become capable of raising prices above normal competitive price levels and the interests of consumers would thus be jeopardized. At the same time, such an enterprise could also use its market power to suppress market competition inappropriately. After analyzing the competitiveness of the appellant, the unilateral and coordinated effects, ease of entry and countervailing power in the market after the merger, the appellee concluded that the merger could lead to competition restrictions and create significant disadvantages. Furthermore, being the first and second largest businesses in the instant noodle market, the two enterprises involved were the main competitors. After the merger, the appellant could claim over 65% of the market share and pressure from its principal competitor would no longer exist. Market concentration would increase and unilateral effects resulted from its capacity to adjust product prices could not be ruled out. Therefore, the appellee’s decision according to Article 12 (1) to prohibit the merger was legally sound.
3. Grounds for disposition:
   

   Combining the above, the appellee believed the pressure from competition between the merging parties would cease to exist, market concentration would grow more significant, and unilateral effects resulted from the capacity to adjust product prices could not be ruled out. Likely disadvantages from competition restrictions thereof incurred would outweigh the overall economic benefit. Hence, the merger prohibition decision was legally well-grounded. The appeal was filed with the same argument previously presented to contest the original decision as legally unsound and request the decision be discarded. The appellee found the argument unjustifiable and the appeal had to be overruled.

Appendix:

Uni-President Enterprise's Uniform Invoice Number: 73251209

Summarized by Lai,Chia-Ching; Supervised by Ren,Han-Ying