– Horizontal Mergers
Abstract
Enterprises employ two methods to pursue growth. One is internal growth, which is achieved through an enterprise's own efforts, and the other is external growth, which can only be achieved by cooperating with other enterprises. The combination of enterprises (through merger, acquisition, and control) is one of the crucial strategies of external growth, and is a goal that major companies around the world are seeking to achieve. The operating environment has been changing rapidly since the arrival of the digital and knowledge economy age around 1990, and the combining of enterprises has also increased. Nevertheless, combining enterprises doesnot always work wonders. Although such actions can enhance the enterprises’ competitiveness, they can also lead to competitive restraints or unfair competition in certain markets. The competition authorities in the world’s major countries have thus adopted supervisory measures to control the combining of enterprises. While Chinese Taipei’s Fair Trade Law also provides for supervisory measures, the substantial content of such supervisory standards still remains abstract even though the Law has been amended on three occasions. The Fair Trade Law takes only the overall economic benefit and harmful restraints to competition as the basis for its abstract evaluation, and lacks theoretical statements that are based on the practical views accumulated by the Fair Trade Commission over the years. For example, because the Fair Trade Law does not specifically clarify and analyze the interaction and empirical relationship between competition laws and other industry-related laws, the enforcement of merger controls can easily lead to miscommunication and confusion. If practical experience can be harmonized with the needs of industry, the Law will reflect the government’s fundamental attitude toward the practical aspects of enterprise merger control, while also systematically informing industry of the key factors to be considered by the competent authority with regard to merger control. It is therefore imperative that the government elaborate onuncertain legal concepts, and make them clear and concrete, in order to facilitate industry compliance. In light of this conclusion, this study has used 144 horizontal merger Decisions of Approval and not Prohibited issued by the Fair Trade Commission from February 1992 to December 2003 as a sample, and has analyzed the substantial content of each industrial combination relative to the two variables of economic benefit and harmful restraints to competition. The study also looks at relevant regulations and legislative precedents governing mergers of the competition law enforcement authorities in major countries in Europe and America to understand the impact that overall economic benefit and harmful restraints to competition have on market performance. This study has the following two specific goals:
We first focus on concepts, relevant theories, and the literature concerning the topic of combinations. We then summarize regulations governing horizontal mergers enforced by competition law authorities in various major countries in order to clarify the constituent factors and other aspects that competition law authorities consider in connection with the variables of “overall economic benefit,” “disadvantages resulted from competition restraint,” and “market performance.” In addition, detailed analyses of specific cases of horizontal mergers in Chinese Taipei are used to illuminate the substantial implications of horizontal mergers in various industries with regard to the overall economic benefit and harmful restraints to competition. Finally, we present suggestions based on the conclusions reached in this study for the reference of the Commission, relevant government agencies, and industry.
The methodology used in this study mostly consists of literature analysis and the organization of information to summarize constituent factors and considerations affecting the overall economic benefit and harmful restraints to competition. We also use past horizontal merger cases evaluated by the Commission and the analytical methods adopted by the authorities in other countries as reference when determining the substantial implications of the overall economic benefit and the harmful restraints to competition for the Commission.
This study consists of five chapters. Chapter One is the preface, and includes the background, motivation, purpose, scope, methods, and limitations of the research. Chapter Two discusses economic theories concerning merger control, and, with regard to basic models of merger control analysis, examines the constituent factors of market structure, horizontal mergers, overall economic benefit, harmful restraints to competition, and market performance as presented in related studies. Chapter Three analyzes constituent factors and considerations concerning the overall economic benefit and harmful restraints to competition as employed by competition law authorities in the major countries of Europe and America. Chapter Four takes 144 approved and not prohibited horizontal merger decisions issued by the Fair Trade Commission as a sample for determining the substantial implications with regard to the overall economic benefit and harmful restraints to competition of horizontal mergers in each industry. Chapter Five contains the conclusions and suggestions derived in this study.
The results of analyzing the 144 horizontal merger cases announced by the Fair Trade Commission from its establishment up to December 2003 show that with regard to the harmful restraints to competition, the Commission’s overriding consideration is whether market share is increased, and whether this may influence competition between enterprises. With regard to the overall economic benefit, while the Commission has different considerations for different industries, the consumers’ welfare, management efficiency, and promotion of competitiveness are the major factors considered. It will be more efficient if enterprises understand the major factors considered by the competent authority regarding mergers in each industry when the enterprises apply to the competent authority for mergers. A better understanding will allow more mergers to be consummated in a timely manner. We therefore suggest that the Fair Trade Commission refers to the Horizontal Merger Guidelines prescribed by the U.S. Federal Trade Commission. We also suggest that enterprises communicate with the Fair Trade Commission prior to notification to avoid misunderstandings. Finally, in light of the underdeveloped state of academic research on merger control, we suggest that researchers devote more attention to this field in the future.