Approval of the assignment of the primary portion of the operations of Ta Ch'eng Cable Transmission Systems Co., Ltd., to Ch'ang Te Cable Transmission Systems Co., Ltd.
Chinese Taipei
Case:
Approval of the assignment of the primary portion of the operations of Ta Ch'eng Cable Transmission Systems Co., Ltd., to Ch'ang Te Cable Transmission Systems Co., Ltd.
Key Words:
merger, cable television
Reference:
Fair Trade Commission Decision of August 18, 1999 (406th Commissioners' Meeting); Decision (88) Kung Chieh Tzu No. 689
Industry:
Television Industry (8520)
Relevant Law:
Summary:
The FTC held that the merger would benefit overall economic interests based on the considerations provided below.
2.1 It would effectively reduce operating costs:
The demarcation and number of operating areas in the cable television market
are already fixed. Too many system operators would inevitably raise concerns
of excessively narrow market scale. As cable television program transmission
system operators are restricted in the areas where they may operate, and
as the installation and operation of fixed equipment such as cables and
head ends is expensive, their operating costs are very high. Furthermore,
their viewer subscription charges are regulated by both the competent authority
and the local government. If operating scale can be expanded after the merger,
average fixed costs would be reduced.
2.2 It would avoid waste of national resources:
Currently, there is overlap between the applicants' cable networks. After
the merger, Ta Ch'eng would dismantle its cable network and Ch'ang Te's
cable network would be used to service the viewers of both companies. The
resulting reduction of capital and labor redundancy, both now and in the
future, apart from improving the overall appearance of the city, would also
avoid the waste of national resources.
2.3 It would avoid passing to viewers the costs of changing system operators:
Ta Ch'eng had been losing money since 1998 and had applied to the Government
Information Office (GIO), Executive Yuan, to terminate its operations. The
prospect of Ta Ch'eng having to pay refunds to viewers as stipulated would
mean losses for the company, and there is no guarantee the rights and interests
of viewers would be protected. After the merger and Chang Te's assumption
of service to viewers, no additional fees would be assessed, the prepaid
fees of Ta Ch'eng's current viewers would be honored, and viewers would
not bear any additional expenses for equipment installation due to the change
in system operators. Ch'ang Te would even pay refunds to Ta Ch'eng viewers
who decided to switch to another operator. Thus, the merger would minimize
or avoid impact to the rights and interests of Ta Ch'eng's viewers.
2.4 It would promote positive development of the industry:
The economy of scale and reduction in costs that would result from this
merger over the long term would help the industry move toward cross-industry
operations and value-added services.
2.5 In view of related opinions of the GIO and the Taipei City Government Department of Information, the official commencement of cable television broadcasting in Taipei, the trend toward integration of broadcasting systems, and the specific method by which the applicant would assume service to viewers, it was deemed that the rights and interests of Ta Ch'eng's former viewers would be protected in the merger.
The FTC's assessment of the merger in terms of restraints on competition:
3.1 Although the merger would increase the degree of centralization in the operating area, viewers would still have a choice since Chin P'in Tao Cable Transmission Systems Co., Ltd., ("Chin Pin Tao") also operated a cable television program broadcasting business in the operating area. Therefore the merger would not create a monopolistic state of non-competition. Moreover, viewer subscription prices would still be subject to control pursuant to Article 51 of the Cable Broadcast Television Law, so the merger would not be immediately or obviously detrimental to the rights and interests of viewers.
3.2 Although the reduction in average costs represented a direct benefit to Ch'ang Te itself, the company indicated that it would use the cost savings to expand the network and to raise reception quality, increase the proportion of its self-produced programming, and achieve the goal of orienting the company toward technology, rapid service, high product quality, a wide range of channels, and local programming. In addition, it would convert its trunk lines into a fiber optic network and convert all viewer lines to 5C coaxial cable, to strengthen the stability and speed of signal transmission, reduce interference such as electronic wave leakages during signal transmission, and provide dedicated program address, decoding, and broadband network services. Thus, the company's internal profit should carry over to benefit greater society and consumers.
3.3 As Ch'ang Te and Chin P'in Tao, which are in the same operating area, are independent of one another, the mutual checks and balances of a competitive system would remain after the merger. Although Chin P'in Tao would be faced with a Ch'ang Te whose market share had been greatly increased, the latter's assumption of service to Ta Ch'eng's viewers would be contingent on their consent. Therefore, Chin P'in Tao would still be able to employ a host of methods including pricing, services, quality, and advertising to win over Ta Ch'eng's former viewers. The merger would not be the decisive factor in market power, and would promote efficient competition and minimize disadvantages in terms of restraints on competition.
In conclusion, the FTC held that the merger would benefit overall economic interests and would have no obvious immediate disadvantages in terms of restraints on competition, so the merger was approved pursuant to the provisions of Article 12 of the Law.
Summarized by Ch'en Chun-yen
Supervised by Ch'en hui-p'ing
Appendix:
Ch'ang Te Cable Transmission Systems Co., Ltd.'s Uniform Invoice Number:
84706017
Ta Ch'eng Cable Transmission Systems Co., Ltd.'s Uniform Invoice Number:
89954346
Chin P'in Tao Cable Transmission Systems Co., Ltd.'s Uniform Invoice Number:
84950932