President Chain Store Corporation applies for approval of merger with Books. Com Co., Ltd. under Article 11 of the Fair Trade Law on the grounds that President Chain Store Corporation will hold 50.025% of the total shares of Books.Com Co., Ltd. after the latter increases the amount of its capital

Chinese Taipei


Case:

President Chain Store Corporation applies for approval of merger with Books. Com Co., Ltd. under Article 11 of the Fair Trade Law on the grounds that President Chain Store Corporation will hold 50.025% of the total shares of Books.Com Co., Ltd. after the latter increases the amount of its capital

Key Words:

convenience store, Internet bookstore, virtual shopping, real-life distribution channels

Reference:

Fair Trade Commission Decision of January 18, 2001 (the 481st Commissioners' Meeting); Decision (90) Kung Chieh Tzu No. 060

Industry:

Chain Convenience Store (4753)

Relevant Laws:

Articles 6(1)(ii), 11 and 12 of the Fair Trade Law

Summary:

1. President Chain Store Corporation (President Chain Store) filed an application for merger under Article 11 of the Fair Trade Law with the Fair Trade Commission (FTC) on the grounds that it would hold 50.025% of the total shares of Books.Com Co., Ltd. after the latter increases its capital amount.

2. Reasons for granting the approval are as follows:

(1) The merger of President Chain Store and Books.Com Co., Ltd. is the type of merger defined in Article 6(1)(ii) of the Fair Trade Law ("where an enterprise holds or acquires the shares or capital contributions of another enterprise to an extent of more than one-third of the total voting shares or total capital of such other enterprise"). The major business of President Chain Store is the operation of chain convenience stores (The Seven-Eleven Stores). It currently operates 2,634 chain stores around Chinese Taipei. Its 1999 annual revenue was NT$49.7 billion which amounted to 9.2% of the total annual revenue of Chinese Taipei's retailers and 49.2% of the total revenue of Chinese Taipei's chain convenience stores of the same year. The major business of Books.Com Co., Ltd. is the operation of Internet bookstores. Its 1999 annual revenue is NT$7,268,000 which amounts to 2.7% of the total annual revenue of the Chinese Taipei's Internet bookstores. The merger between President Chain Store and Books. Com C o., Ltd. will create a commercial environment connecting virtual shopping and real-life distribution channels. After a customer places his orders for books with the Internet bookstore on the Internet, the books will be delivered to and ready for pick up at a Seven-Eleven store near the customer's residence at anytime. The merger will increase the convenience of Internet shopping and strengthen consumers' confidence in Internet shopping. This may further facilitate Internet shopping in real life and promote the development of domestic e-commerce industry. The universal nature of e-commerce may help expand Chinese Taipei's foreign trade market and boost domestic trading. The merger will make a positive contribution to the overall economy of Chinese Taipei. Further, books have been predominantly distributed through wholesaler/distributor, retailers, direct sales, mail orders, and bulk purchase by libraries, schools, and the Internet. The percentage of books purchased through the Internet has been trivial. Curre ntly, there are only a limited number of Internet bookstores in the market. Nevertheless, any business that has an agreement with a publisher or a distributor could obtain books and establish an Internet bookstore through the interface of the Internet. Therefore, given that the existing market share of Internet bookstores is low and the barriers to market entry are minimal, it is unlikely that the merger would adversely restrain competition in the market.

(2) Based on the foregoing analysis, the overall economic benefit of the merger between President Chain Stores Corporation and Books.Com Co., Ltd. outweighs any disadvantages resulting from restraint of competition. The FTC therefore granted approval to the merger application under Article 12 of the Fair Trade Law.

Appendix:

President Chain Store Corporation's Uniform Invoice Number: 22555003

Summarized by Taur, Rong;

Supervised by Chen, Yuhn-Shan


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