Unilever Taiwan Ltd. and CPC/AJI (Taiwan) Ltd. applied to the Fair Trade Commission for approval of merger because they frequently conducted joint business operations
Case:
Unilever Taiwan Ltd. and CPC/AJI (Taiwan) Ltd. applied to the Fair Trade Commission for approval of merger because they frequently conducted joint business operations
Key Words:
joint business operations, approval of merger
Reference:
Fair Trade Commission Decision of June 21, 2001 (the 502nd Commissioners' Meeting); Decision (90) Kung Chieh Tzu No. 607
Industry:
Cleaning Products Manufacturing Industry (1830) and Other Condiments Manufacturing Industry (0879)
Relevant Law:
Article 12 of the Fair Trade Law
Summary:
1. The issue of this case is focused on an application submitted by Unilever Taiwan Ltd. and CPC/AJI (Taiwan) Ltd. (an affiliate of Bestfoods) to conduct joint business operations and integrate personnel employment and termination decisions. The companies filed the application with the Fair Trade Commission (FTC) according to the provisions of Article 6(1)(iv) and 6(1)(v) of the Fair Trade Law (FTL). Preliminary evaluation by the undertaking unit of the FTC had determined that the provisions of Article 6(1)(iv), "frequently conducts business operations jointly with another enterprise, or is entrusted with the operation of another enterprise" were applicable to the particular application and thus it falls under the purview of the FTL. 2. Unilever U.S. was established as a jointly invested unit of U.K.-based Unilever PLC (25 %) and Netherlands-based Unilever N.V. (75 %). Bestfoods is one of the major U.S. food companies that doing international business and is mostly engaged in food product manufacturing and distribution services. In 1999, Bestfood's sales revenues reached US$8.6 billion. Bestfoods controls a 50 % equity stake in CPC/AJI (Taiwan) Ltd. (established and registered on 28 November 1983 in Chinese Taipei). In 2000, Unilever U.S. and Bestfoods began their coordinations on a merger and acquisition plan, which led to Unilever U.S. indirectly acquiring a 50 % equity stake in CPC/AJI (Taiwan). Operating revenues (in Chinese Taipei) for Unilever U.S. and its 50% controlled CPC/AJI (Taiwan) from fiscal year 1999, however, did not reach NT$5 billion threshold, nor did its market share during that period reach the threshold requirement provided in Article 11(1)(ii) ("one of the enterprises participating in the merger has one-fo urth of the market share"); As a result, Unilever U.S. did not apply to the FTC for approval for the previously mentioned merger. Also, Unilever Taiwan is the Chinese Taipei subsidiary of Mavibel B.V., a Dutch holding company invested by Unilever N.V., which is a juristic stockholder in Unilever U.S (Unilever Taiwan, established and registered on 21 December 1989, is 99.9 % controlled by Mavibel B.V. 3. Assessment of the proposed merger's substantive impact on the domestic economy: (1) Economic impact assessment: The cooperative plan being pursued by Unilever Taiwan and CPC/AJI (Taiwan) involves joint operation of the two companies' everyday business affairs, including CPC/AJI (Taiwan)'s human resources policy and changes to that policy, joint procurement of raw materials and packaging materials for the two companies, and joint operation of sales and marketing, production, distribution and financial administration. Although the plan appears that two separate companies will be conducting joint operations, in reality the two companies are units under Unilever International and the merger is merely a coordination of logistical management resources, sales and marketing operations which will not lead to a rise of the two companies' share in a specific market. (2) Assessment of restrictions on competition: The cooperative plan being pursued by Unilever Taiwan and CPC/AJI (Taiwan) involves joint operation of the two companies' everyday business affairs. The main areas of business of the two companies, however, differ, with Unilever Taiwan producing cleaning products and beverages and CPC/AJI producing condiments and seasonings. Consequently, neither company will experience a change in market position after the start of joint operations. Nor will the merger damage the market structure, alter the shares in the market of the various brands competing with the two companies, or restrict competition. 4. In sum, this operational merger is considered an internal operational adjustment within Unilever International that will not substantively alter the market position of lines of laundry detergent, shampoo, skin care products, tea and beverages, soup and soup stock produced by either Unilever Taiwan or CPC/AJI (Taiwan). Market structure will not move toward greater concentration as a result of this merger. Approval for the merger application was thus granted under Article 12 of the FTL, which states that "The Central Competent Authority may approve an application for merger filed pursuant to the preceding Article if the overall economic benefit of the merger is greater than the [resulting] disadvantages of restraining competition." Appendix: Unilever Taiwan Ltd.'s Uniform Invoice Number: 23526604 CPC/AJI (Taiwan) Ltd.'s Uniform Invoice Number: 12476682 Summarized by Hou, Vh-Hsien; Supervised by Wu, Te-Sheng