ChinaTrust Commercial Bank Co., Ltd. applied for approval to combine with Chailease Credit Services Co., Ltd. under Articles 6(1)(ii) and 11(1)(iii) of the Fair Trade Law by acquiring 99.97% of the total voting shares of Chailease Credit Services Co., Ltd.
Case:
ChinaTrust Commercial Bank Co., Ltd. applied for approval to combine with Chailease Credit Services Co., Ltd. under Articles 6(1)(ii) and 11(1)(iii) of the Fair Trade Law by acquiring 99.97% of the total voting shares of Chailease Credit Services Co., Ltd.
Key Words:
accounts receivable, operational efficiency
Reference:
Fair Trade Commission Decision of July 26, 2001 (the 507th Commissioners' Meeting); Decision (90) Kung Chieh Tzu No. 673
Industry:
Domestic Banking (6212)
Relevant Laws:
Summary:
1. The applicant in this case, ChinaTrust Commercial Bank Co., Ltd. (ChinaTrust), in addition to its core banking business, applied to the Ministry of Finance (MOF), the competent authority governing the financial industry, to conduct "accounts receivable purchasing" operations. Following MOF's approval, ChinaTrust has been actively developing this business to provide customers with a more versatile range of services. ChinaTrust plans to invest in Chailease Credit Services Co., Ltd. (Chailease Credit), a company specializing in "accounts receivable purchasing," and is seeking to acquire 99.97% of Chailease Credit's total voting shares. This is consistent with the type of merger defined in Article 6(1)(ii) of the Fair Trade Law (FTL). ChinaTrust's revenues for the preceding fiscal year is approximately NT$72.66 billion, so the merger is thus consistent with the circumstances prescribed by Article 11(1)(iii) of the FTL (which prescribes NT$5 billion as the threshold amount). ChinaTrust therefore filed an application with the Fair Trade Commission (FTC) for approval of the merger. 2. ChinaTrust's major business is accepting deposits and extending credit. Ministry of Finance Bureau of Monetary Affairs statistics show that, as of the end of March 2001, ChinaTrust's total deposit and credit value was 3.78% and 3.56%, respectively, of the total deposit and credit values of all domestic banks. During March 2000, ChinaTrust applied to the Ministry of Finance for approval to conduct "accounts receivable purchasing" operations. Following MOF's approval, ChinaTrust obtained 9.33% market share in 2000 -behind only Bank SinoPac and ChaiLease Credit. Since Chailease Credit is not authorized to conduct banking business, the only business in common between the two combining enterprises is "accounts receivable purchasing." 3. ChaiLease Credit Services generally covers the business of "purchasing accounts receivable" from ChaiLease Finance Co., Ltd., so there were concerns as to whether the merger of ChinaTrust and ChaiLease Credit may seriously affect market competition regarding "accounts receivable purchasing" operations. It was found, however, that with respect to a seller providing products or services, one of the following options of transaction may be selected: categorizing its credit as collectable debt through issuance of loans; issuance of letters of credit; direct transfers; and acceptance of negotiable instruments. Thus the degree of interdependence between the two combining enterprises may not necessarily increase as a result of the merger. In addition, the requirement for approval to conduct "accounts receivable purchasing" operations is minimal. Generally any business may conduct this line of business as soon as they apply for registration with the Commercial Division of the Ministry of Economics. Since the Ministry of Finance's Bureau of Monetary Affairs began allowing banks to apply for approval to operate this type of business in 1997, several banks have entered the market. This particular market has been highly liberalized and poses almost no restrictions on enterprises seeking to enter. Therefore, the merger should not cause any concern with respect to undue restrictions on market competition. 4. After the two enterprises are merged, ChinaTrust may benefit from ChaiLease Credit's professional expertise in developing businesses and ChaiLease Credit's comprehensive information technology systems. With the existing client base, market expansion skills and information dissemination capabilities of ChinaTrust, the resources of both enterprises could be shared and fully utilized to increase operational efficiency. Meanwhile, ChaiLease Credit may also benefit from ChinaTrust's investment to lower overhead and provide its customers with more reasonable and competitive fee schedules. This will also promote the distribution efficiency of overall socio-economical resources. 5. In summary, the merger is unlikely to seriously restrict competition, rather, it may improve overall operational efficiency by expanding business operations. The overall economic benefits outweigh the disadvantages resulted from the competition restraint. Therefore, the merger should be allowed under Article 12 of the FTL. Appendix: ChinaTrust Commercial Bank Co., Ltd.'s Uniform Invoice Number: 03077208 Chailease Credit Services Co., Ltd.'s Uniform Invoice Number: 16162347 Summarized by Sun, Ya-Chuan; Supervised by Horng, Der-Chang