Daimler-Chrysler AG planned to hold 99.8% of the stock shares of Chrysler (Taiwan) Co., Ltd., so it applied for approval to engage in a merger, in accordance with Article 11 of the Fair Trade Law

Chinese Taipei


Case:

Daimler-Chrysler AG planned to hold 99.8% of the stock shares of Chrysler (Taiwan) Co., Ltd., so it applied for approval to engage in a merger, in accordance with Article 11 of the Fair Trade Law

Key Words:

offshore merger, compact car

Reference:

Fair Trade Commission Decision of February 2, 2000 (the 430th Commissioners' Meeting); Letter (89) Kung Ch'u Chieh Tzu No. 123

Industry:

Automobile Production Industry (3231)

Relevant Laws:

Articles 11 and 12 of the Fair Trade Law

Summary:

1. On 17 November 1998, Daimler-Benz and Chrysler merged into a new enterprise Daimler Chrysler AG. The principle acts of the companies in that merger took place offshore. This case involves aspects of that merger, and issues concerning imported brands. This case does not involve the R&D, production, etc., of cars in Chinese Taipei.

2. Daimler-Chrysler AG was a manufacturer and seller of Daimler Benz cars. Chrysler Taiwan was an importer and seller of Chrysler cars in Chinese Taipei. Although the brands of the two companies were European and North American, respectively, the two companies were horizontal competitors in Chinese Taipei's car market, so the merger constituted a merger between horizontally competitive companies.

The Fair Trade Commission found that: (1) There were many competing brands in Chinese Taipei's car market (for example, in the compact car segment, the top five brands of cars were produced in Chinese Taipei); (2) the two companies in question respectively accounted for 1.6% and 1.9% of the sales of compact cars produced and sold in Chinese Taipei in 1998; and (3) Daimler-Chrysler AG said the existing car distribution systems for the brands of these two companies in Chinese Taipei would remain unchanged, that those systems would not be in integrated, and that the number of competing enterprises and brands would not be reduced, etc. So, brand competition in Chinese Taipei's car market would not be reduced as a result of the merger, as all everything else remains the same.

3. The merger constituted a merger between horizontally competitive companies, the surviving enterprise would engage only in sales, and maintenance & repair in Chinese Taipei's car market. It would not engage in capital- and technology-intensive R&D and production of cars. As to the development and exploration of marketing channels for cars, although the merger would affect the organizational scale of the marketing, and the maintenance & repair outlets of the two companies, their brand marketing systems in Chinese Taipei would not be integrated. Daimler-Chrysler AG said that this was because its sole distributor in Chinese Taipei, Chunghua Benz, would not become an affiliate of the new enterprise, and because the existing distribution systems of Daimler-Benz and Chrysler would not be integrated.

The Fair Trade Commission found that: (1) There were many competing brands in Chinese Taipei's car market; that there was not a dearth of well-known international brands in the market; that the brands of the two companies are in fierce market competition; (2) that although some car sellers in Chinese Taipei were independent, most were large or small regional distributors; and (3) that because there were many car sellers, and general maintenance & repair companies in the greater industry, all of whom had the potential to become distributors, there was no likelihood that Daimler-Chrysler AG would obtain a monopolistic or dominant position in the car selling market in Chinese Taipei. So, up- and down-stream sellers with plans to enter the market could choose a suitable sales approach according to their capital, marketing strategy, and human resources. There were insufficient facts and reasons to deem that, as a result of the merger, the market for a specific product would be closed, and that opportunitie s of other enterprises to participate and compete in the market would thereby be improperly affected. So, the level of difficulty for other enterprises to enter and be a seller in the market for the related product would not be raised as a result of the merger.

4. The merger would not significantly restrict competition in the market for a specific product in Chinese Taipei, so it was approved pursuant to Article 12 of the Fair Trade Law.

Summarized by Lin Chin-Tan


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