Application for merger approval for the merger between Grand Keelung CATV Co., Ltd. and Gilung CATV Co., Ltd., pursuant to Article 11 of Fair Trade Law
Case:
Key words: approval for merger, cable televisionApplication for merger approval for the merger between Grand Keelung CATV Co., Ltd. and Gilung CATV Co., Ltd., pursuant to Article 11 of Fair Trade Law
Reference:
Fair Trade Commission Decision of December 29, 1999 ( the 425th Commissioners' Meeting); Approval Decision (88) Kung Chieh Tzu No. 1033.
Industry:
Television Industry (8520)
Relevant Laws:
Article 6(1)(iii) of the Fair Trade Law
Summary:
1. This matter involved the assignment of rights and obligations associated with providing home viewers with signal services of cable television programs, including clear cable television program signals, maintenance and repairs, installation and removal of extensions, and collection and refund of fees. The assignor and assignee were Grand Keelung CATV Co., Ltd. ("Grand Keelung") and Gilung CATV Co., Ltd. ("Gilung CATV") respectively. The deal was within the definition of "merger" under Article 6(1)(iii) of the Fair Trade Law (FTL). As a consequence of the merger in this transaction, Gilung CATV would have a 100% share of the market; therefore, a merger approval is necessary under Article 11(1)(i) of the FTL, which requires application for merger approval when "as a result of the merger, the surviving enterprise would have one-third or more of the market share." Accordingly, Gilung CATV and Grand Keelung filed for a merger approve with the Fair Trade Commission (the Commission) pursuant to Article 7 of the FTL Enforcement Rules. 2. The domestic cable television business is currently divided into operating areas of not less than 150,000 households. Under the present circumstances in which operating areas have not yet been re-divided and the number of operators has not yet been changed, the scale of the market would likely be too narrow if the number of system operators is too large. In addition, cable television operators are restricted in terms of the areas in which they may operate and yet they need to invest a considerable amount of funds toward the installation and operation of related fixed equipment such as cables and head-ends. As a result, their operating costs are very high. The merger would benefit Gilung CATV as it enters into cross-industry operations such as telecommunications and the Internet, and value-added services such as home shopping and home security. These developments would be considered favorable to the industry as a whole. The Government Information Office (GIO) said the merger would benefit its parti cipants by reducing their operating and management costs, that it would benefit society by reducing waste of resources, and that it would benefit consumers by providing them with higher quality services. 3. According to Article 72 of the Cable Broadcast Television Law, Grand Keelung was required to suspend its operations in the cable television program transmission business by not later than 1 November 1999. After the merger, Grand Keelung's rights and obligations to provide viewers with video services would be assigned to Gilung CATV. There would be no break in the supply of video services to viewers, their prepaid fees would not be jeopardized, and they would not be required to pay for installation of additional equipment. Also, the merger would reduce the cost of the changeover of cable television program system operators which would be born by the consumers. 4. Although Gilung CATV would be the only cable television program transmission operator in its operating area after the merger, there would be no directly or apparently negative effect on consumers' rights or interests because the company is still subject to regulatory controls. For example, system operators' viewer fees shall be approved by the governing municipality, county, and city governments based on fee standards set by the GIO's Cable Broadcast Television Review Committee ("Review Committee"). In the event the cable television system operators hinder fair competition through monopoly, mergers, or concerted actions, the central government authority may require re-applications and accept new applications for operating permits pursuant to Article 33 of the Cable Broadcast Television Law. According to Articles 35 and 36 of the Cable Broadcast Television Law, the Review Committee shall review the operators' business plans every three years during the term of their operating permit. If the review results are not acceptable and the operator is not able to make improvements within a specified period of time, the permit may be revoked. An operating permit has a term of nine years and the operator must conduct its cable television system operations in strict conformity with the relevant regulations for the permit to be renewed by the GIO. In addition, potential competitors could enter the operating area, which act would help to minimize the negative effect of restricting competition. 5. In summary, the merger would be beneficial to overall economic interests and would not have a clear and present disadvantage in terms of restricting competition. Therefore it is approved pursuant to Article 12 of the FTL. Appendix: GRAND KEELUNG CATV CO., LTD.'s Unified Invoice Number: 84956339 GILUNG CATV CO., LTD.'s Unified Invoice Number: 97162515 Summarized by Ch'en Yi-ch'eng; Supervised by Ch'en Hui-p'ing