Merger application between Ch'un Chien CATV Co., Ltd. and Wei Da CATV Co., Ltd.
Case:
Merger application between Ch'un Chien CATV Co., Ltd. and Wei Da CATV Co., Ltd.
Keywords:
disadvantage through restraint of competition, concession permit, fixed line network, direct satellite broadcast, cable television
Reference:
Fair Trade Commission Decision of March 29, 2000 (the 438th Commissioners' Meeting)
Industry:
Television Industry (8520)
Relevant laws:
Article 11(2) of the Fair Trade Law
Summary:
1. Concerning the application for enterprise merger in which Ch'un Chien CATV Co., Ltd. ("Ch'un Chien") would be assigned the major assets and operations of Wei Da CATV Co., Ltd. ("Wei Da"), the 438th Commissioners' meeting on March 29, 2000 ruled that the application for merger shall be rejected pursuant to Article 11(2) of the Fair Trade Law due to the reasons that the merger as a whole would not bring about obvious economic benefits and that it would cause significant disadvantages through restraint of competition.2. Ch'un Chien aims to take over Wei Da's major assets and operations in this merger. If successfully combined, the number of subscribers in Ch'un Chien's approved operating districts would total more than 180 thousand when the combined company begins broadcasting operation, making it the larg est domestic cable operator. The scale of its operation exceeds the reasonable limit of 150 thousand subscribers for each permitted district of operation-an important indicator drawn up for the "Study of the division of cable TV operating districts in Chinese Taipei" and used by the Government Information Office as its reference in dividing up cable broadcasting and television operating districts. Furthermore, though the market status quo of direct satellite broadcasting operation does imply some degree of interchangeability between satellite and cable operators with respect to technical services, Ch'un Chien will be capable of only a limited degree of competition against direct satellite broadcasting operators for a fairly long time to come, considering the differences with regard to the type of channels they provide, the number of channels, and the fees they charge. So Ch'un Chien would be in a highly advantageous position in its current approved business. Judging by the degree of market saturation and the number of competitors in the cable television market, the realization of the merger will result in an obvious disadvantage toward competition and it would not bring more economic benefits to upstream channel providers and end-consumers. There is, consequently, no logical necessity for the merger. 3. The realization of the merger would indeed also reduce the initial costs for layout of the cable television system's industrial network and equipment, avoiding a waste of resources caused by overlapping networks, and by so doing Ch'un Chien would enhance its chances of acquiring cross-business operations. But according to current market practices, when stepping into telecommunications business, cable television operators mainly conduct circuit leasing business or invest in fixed line businesses; and when stepping into information telecommunications business, they mainly enter into strategic alliances with Internet service providers. The fulfillment of the merger does not therefore have the sign ificant relevancy or necessity for the promotion of cross-business operations for cable television operators-it has only internal economic benefits for the enterprise but no significant external economic benefits. There are no concrete proposals in the application for merger regarding how to prevent restraint of competition or externalize its internal interests. 4. Taken into consideration is also the fact that operation of a cable broadcasting and television system is a concession business which requires considerable time in preparation for establishment - three years or more to be specific - from network rollout, inspection of established engineering by authorities, to obtaining operation permit. The enterprises involved in this merger are approved cable broadcasting and television operators competing with each other in the same market district. After the combined company began operation in accordance with the Cable Broadcasting and Television Law, it would impose an entry barrier on new op erators within a considerable period of time, even though new operators would enter into competition as application for new launches reopens pursuant to Article 33 of the same law. 5. To sum up, undertaking the merger would not have significant economic benefits and would result in disadvantageous competition. The case is rejected by the Commission pursuant to Article 11(2) of the Fair Trade Law.Appendix:Ch'un Chien CATV Co., Ltd.'s Uniform Invoice Number: 16085969Wei Da CATV Co., Ltd.'s Uniform Invoice Number: 97175758Summarized by Liu Hsi-jung; Supervised by Hu Kuang-yu