Imperial Chemical Industries PLC, Ineos Acrylics Holding Limited and Imperial Chemical Industries Alpha B.V. applied for merger approval
Case:
Imperial Chemical Industries PLC, Ineos Acrylics Holding Limited and Imperial Chemical Industries Alpha B.V. applied for merger approval
Key Words:
extra-territoriality, indirect control
Reference:
Fair Trade Commission Decision of August 16, 2001 (the 510th Commissioners' Meeting); Decision (90) Kung Chieh Tzu No. 778
Industry:
Relevant Laws: Articles 6, 11 and 12 of the Fair Trade LawOther Chemical Materials Manufacturing Industry (1790)
Summary:
1. Imperial Chemical Industries PLC (ICI) and Ineos Acrylics Holding Limited (Ineos) jointly own all shares of "Imperial Chemical Industries Alpha B.V. (Alpha). ICI holds 51 % and Ineos holds 49 %. ICI plans to transfer all its share holdings in Alpha to Ineos. After the transfer, Ineos will hold 100 % of total voting shares in Alpha. 0. Domestically in Chinese Taipei, Alpha holds 60 % of total voting shares in Kaohsiung Plastic Chemical Industries Co., Ltd. (Kaohsiung Plastic). Because the planned extra-territorial merger will enable Ineos to hold 100 % of total voting shares in Alpha, Ineos will indirectly control Kaohsiung Plastic. Kaohsiung Plastic specializes in the production and distribution of methyl acrylate monomer, its market share for which is as high as 50 %. The merger falls within the type of mergers defined in Article 6(1)(v) of the Fair Trade Law (FTL): "directly or indirectly controls the business operation or the appointment or discharge of personnel of another enterprise." The merging enterprises therefore filed an application for approval to merge under Article 11(1)(ii) of the FTL. 2. ICI's share transfer to Ineos will increase Ineos' share holding in Alpha from the existing 49 % to 100 %. This extra-territorial merger falls within the type of mergers defined in Article 6(1)(v) of the FTL: "where an enterprise holds or acquires one-third or more of the voting rights or total capital represented by the shares or capital contribution of another enterprise." The merging enterprises in this instance are Ineos and Alpha. However, Alpha does not directly nor indirectly distribute methyl acrylate monomer within Chinese Taipei. Alpha's business scope is limited to investment only. Ineos' sales in Chinese Taipei during 2001 did reach the Fair Trade Commission's publicly announced threshold of NT$500 million. According to Paragraph 4 of the Fair Trade Commission's Disposition Principles for Extra-Territorial Matters, which stipulates provisions for assessment of sales figures for Chinese Taipei and market shares, the merger does not meet the criteria of Article 11(1) of the FTL requirin g the filing of an application for approval. However, the extra-territorial merger will make Alpha a wholly owned subsidiary of Ineos and give Ineos indirect control of 60 % of the total voting shares in Kaohsiung Plastic. Ineos may, through Alpha, appoint representatives to serve as a members of the board of directors of Kaohsiung Plastic. The effect of the merger will give Ineos direct or indirect control of the business operations of Kaohsiung Plastic and thus make the it within the definition of mergers under Article 6(1)(v) of the FTL. Kaohsiung Plastic held more than a 50 % share of Chinese Taipei's methyl acrylate monomer market in 2000 (including both import and domestic sales figures). This falls within the type of mergers defined in Article 11(1)(ii) of the FTL: "one of the enterprises in the merger has one-fourth of the market share." The merging enterprises are therefore required to file an application for approval. 3. Ineos specializes in the production and distribution of methyl, methyl acrylate, acrylic acid, resin, modified polymer, and synthetics. The other merging enterprise, Kaohsiung Plastic, specializes in the production and distribution of chemicals such as methyl acrylate monomer, gypsum and sulphuric acid diammonium. Kaohsiung Plastic holds 50 % of the Chinese Taipei market for methyl acrylate monomer. 3. 3. After the merger, Ineos will indirectly control Kaohsiung Plastic and will, through Alpha, appoint three representatives to act as board directors (i.e. more than half of the total number of board directors) and one to act as a supervisor. However, Alpha will not, whether directly or indirectly, distribute methyl acrylate monomer in Chinese Taipei. Ineos' total sales in Chinese Taipei for 2001 were only NT$500 million, just 1.25 % of total sales in Chinese Taipei [of said product] for that year. Its other subsidiaries or affiliated enterprises will neither directly nor indirectly engage in the distribution of methyl acrylate monomer. There is no overlapping between the businesses of the merging enterprises. The merger will affect only the subsidiary relationship between Kaohsiung Plastic and its parent companies. It will not significantly affect said distribution channels and market share. There is little cause for concern over whether the merger will restrict market competition. Therefore, the merger does not create an obviously adverse impact on the competition environment of a specific domestic market. The application is hereby approved under Article 12 of the FTL. Appendix: Kaohsiung Plastic Chemical Industries Co., Ltd.'s Uniform Invoice Number: 85803825 Summarized by Yang, Chia-Hui; Supervised by Lin, Kin-Lan