Yahoo! Inc. and Kimo.com (Cayman) Corporation, because of their offshore combination, applied for permission to combine pursuant to Article 11 of the Fair Trade Law
Case:
Yahoo! Inc. and Kimo.com (Cayman) Corporation, because of their offshore combination, applied for permission to combine pursuant to Article 11 of the Fair Trade Law
Key Words:
offshore combination, portal website, Chinese language Internet market
Reference:
Industries: Information Provision Services (7503)Fair Trade Commission Decision of December 21, 2000 (the 476th Commissioners' Meeting); Decision (89) Kung Chieh Tzu No. 1165
Relevant Laws:
Summary:
1. Subject Matter of the Application All the shareholders of Yahoo! Inc. ("Yahoo!") and its wholly owned subsidiary, Yahoo! International Acquisitions Holdings Inc. ("Yahoo! Holdings"), and Kimo.com (Cayman) Corporation ("Kimo") jointly executed a "stock purchase agreement", and planned to carry out a merger outside the Republic of China under which Yahoo! Holdings would acquire at least 99 percent of Kimo's outstanding shares. Since this would affect the affiliate relationship between Kimo and its domestic subsidiary, Taiwan Kimo.com Co., Ltd. ("Kimo Taiwan"), the parties applied for permission to combine under Articles 6(1)(ii), 6(1)(v), and 11(1)(ii) of the Fair Trade Law. 2. Contents of the Approval All the shareholders of Yahoo! and its wholly owned subsidiary Yahoo! Holdings and Kimo jointly executed a "stock purchase agreement", and planned to carry out a merger outside the Republic of China under which Yahoo! Holdings would acquire at least 99 percent of Kimo's outstanding shares. This would affect the affiliate relationship between Kimo and its domestic subsidiary, Kimo Taiwan. It was a combination of corporations regulated by Article 6(1)(ii) and 6(1)(v) of the Fair Trade Law. The Commission should approve the application pursuant to Article 12 of the Fair Trade Law. 3. Reasons for granting the approval are as follows: (1) The applicants of the case, Yahoo! and its wholly owned subsidiary, Yahoo! Holdings, and Kimo will exercise offshore combination. This proposal will change the control subject over Kimo's subsidiary, Kimo Taiwan. The result of which is that Yahoo! will obtain indirect control power over business operation and personnel management of Kimo Taiwan. After the combination, Kimo Taiwan may bring Yahoo's global competitive technology and resources home. Further with the local market channels of the Kimo Taiwan, Chinese Taipei's largest portal website, the combination will help participating enterprises raising their economic power and operational efficiency, which will provide more diverse and high-quality service to Chinese Taipei Internet users. The combination, by interface of their management capacity and resource, will enhance their operational efficiency. (2) The participating enterprises such as Kimo Taiwan and Yahoo! Taiwan are major Internet portals in Chinese Taipei. Survey reveals an 85% overlap between the users of the Yahoo! Taiwan and Kimo Taiwan; i.e. 85% of Yahoo! Taiwan visitors also browse Kimo Taiwan. The rate of Internet user and Internet advertising market in Chinese Taipei still has considerable room for development. Therefore, the merger will not have a direct impact on the density of specific market or on the structure of portal website in Chinese Taipei. If other conditions remaining unchanged, the merger will not significantly alter the degree of competition in the market and is highly unlikely to restrain competition. Instead, the merger will be a catalyst in the upgrading of overall Internet service quality in Chinese Taipei, causing growth in the Internet user population and creating increased market demand. Overall, it should be conducive to the development of the Internet in Chinese Taipei by stimulating benign competition amon g Internet enterprises. (3) Obstacles to market entry by Internet portals are minimal. Because Internet portal services are high in substitutability and imitativeness, any enterprise may gain access to the market and obtain the leading position on the strength of technological breakthroughs. To increase user reliance and stay in the race, the existing market leaders must continually upgrade the depth and breadth of their website links and develop new technologies and new services, giving rise to natural benign competition among the Internet portals. Aside from the threat from their competitors, the Internet portals are also constantly challenged by users who disregard portals and directly access the websites of content providers. So, the merger in this case is unlikely to increase the difficulty of access to the relevant markets for other enterprises. (4) There is an urgent need for integration of operational scale in the course of competition among Internet operators in the Chinese language Internet market. This merger will underscore the importance of the Chinese language Internet market and will bring in advanced international technology to stimulate benign competition in Chinese Taipei's Internet portal industry, accelerate upgrading of domestic portals in terms of technology and competitiveness, and strengthen the overall operational makeup of the industry, promoting industrial development and upgrading national competitiveness. So the merger should have an overall positive effect on Chinese Taipei's developing information and Internet industries. (5) In sum, the approved merger will have little effect on competition in the short term and is unlikely to restrain competition in relevant markets. Overall, the merger will prove beneficial by helping local websites to upgrade in technology and competitiveness, by creating profit opportunities through alignment with international standards, and by enhancing the quality of service to Internet users at large. The merger was therefore approved pursuant to Article 12 of the Fair Trade Law. Summarized by Li-Na Lu; Supervised by Kuang-Yu Hu