Application by the Taiwan Broadband Communications Co., Ltd., Preparatory Office for merger with South Taoyuan CATV Co., pursuant to Article 11 of the Fair Trade Law

Chinese Taipei

Case:

Application by the Taiwan Broadband Communications Co., Ltd., Preparatory Office for merger with South Taoyuan CATV Co., pursuant to Article 11 of the Fair Trade Law

Key Words:

approval of merger; cable television

Reference:

Fair Trade Commission Decision of August 18, 1999 (the 406th Commissioners' Meeting); Letter (88) Kung Chie Tzu No. 704

Industry:

Television Industry (8520)

Relevant Law:

Article 6 (v)of the Fair Trade Law

Summary:

1. The Taiwan Broadband Communications Co., Ltd., ("Taiwan Broadband") Preparatory Office intended, after establishment and registration, to acquire through reinvestment 75% of the stock of South Taoyuan CATV Co., Ltd., ("South Taoyuan"), and to provide that company with technical consulting services with respect to business operations and so forth, and to purchase from it partial network equipment, and thus to directly or indirectly obtain authority, respectively, over South Taoyuan's business operation or personnel hiring and dismissal. This acquisition conforms to the type of merger defined in Article 6(v) of the Fair Trade Law ("the Law"). South Taoyuan had a market share of approximately 32%, and was required to file an application for approval of merger pursuant to Article 11(1)(ii) of the Law, which mandates such an application if "one of the enterprises participating in the merger has a one-fourth share of the market." The Taiwan Broadband Preparatory Office therefore filed an application for approval of merger with the FTC in accordance with Article 7 of the Law's Enforcement Rules.
   
   
2. The applicant intended to develop into a specialized cable television multi-system operator company, and to invest in and operate specialized cable television and cable television broadcasting systems. It would provide South Taoyuan with financial, technological, and operations management support, rapidly upgrade the quality of the said company's network and operations, and offer consumers more advanced and diversified services. It furthermore currently had entirely no share of the domestic cable television multi-system market. The merger in this case would enable it to enter the cable television multi-system market, thereby promoting free competition in that market.
   
   

3. Although the merger between the applicant and South Taoyuan would create a situation whereby South Taoyuan, South Taoyuan Broadcasting Co., Ltd., and Shin Li Broadcasting Co., Ltd., would all be operated by a single operator within the South Taoyuan operating zone, and would thereby increase the concentration of the local market, other enterprises were still operating cable television program broadcasting businesses within the zone. Furthermore, two more cable television system operators were scheduled to join the operations in the zone in the future, so viewers would still have room to choose. Thus, the merger was not expected to create a monopolistic state of non-competition. Moreover, Article 51 of the Cable Broadcast and Television Law provides that fee standards for system operators must be approved by the competent central authority. Therefore, even if the enterprises in this case were to obtain greater price control capability, they would still be subject to regulation by the competent central authority, so the merger would not run counter to the interests of viewers in any obvious way.
   

4. Articles 19(2) and 19(3) of the Cable Broadcast Television Law provide, respectively,

   Shares of Cable Television shall be dispersed. One shareholder shall not hold more than 10% of total issued shares of a System Operator; the combined shareholdings of a shareholder and his or her related enterprises, or spouse, lineal blood relatives, lineal relatives through marriage, and collateral blood relatives within the second degree shall not be more than 20% of total issued shares of a System Operator.

   and

   The total direct and indirect shareholdings of a foreign person in a System Operator shall be less than 50% of the System Operator's total issued shares. Shares held directly by foreign persons may only be held by juristic persons, and the total of such direct shareholdings shall be less than 20% of that System Operator's total issued shares.

   The merger in this case would not obviously restrain the functioning of competition, nor would it adversely affect the overall economy. It did, however, involve the provisions of Articles 19(2) and 19(3) of the Cable Broadcast Television Law. The merger was therefore approved pursuant to Article 12 of the FTL, but the proviso was added that the case must comport with the relevant provisions of Articles 19(2) and 19(3) of the Cable Broadcast Television Law and relevant regulations.

Summarized by Ch'en Yi-ch'eng
Supervised by Ch'en Hui-ping

Appendix:
Taiwan Broadband Communications Co., Ltd.'s Uniform Invoice Number: 84956339
South Taoyuan CATV Co., Ltd.'s Uniform Invoice Number: 84666774

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