Teco Electric and Machinery Co., Ltd. and Taian Electric Co., Ltd. applied for merger approval
Chinese Taipei
Case:
Teco Electric and Machinery Co., Ltd. and Taian Electric Co., Ltd. applied for merger approval
Key Words:
merger, restraint of competition
Reference:
Fair Trade Commission Decision of July 31, 2003 (the 612th Commissioners' Meeting)
Industry:
Power Generation, Transmission and Distribution Machinery Manufacturing and Repairing (2811); Air Conditioning Equipment Manufacturing (2821); Television Set and Video Tape Recorder and Player Manufacturing (2631); Other Electronic Parts and Components Manufacturing Not Elsewhere Classified (2799)
Relevant Law:
Summary:
1. Teco Electric and Machinery Co., Ltd. (Teco) planned a combination with Taian Electric Co., Ltd. (Taian) through a merger, with the surviving company after merger to be Teco and the extinguished company to be Taian. The share swap ratio was temporarily set at 1.05 to 1.25 shares of Taian stock per share of Teco stock issued. This case conformed to the merger defined as "mergers with other enterprises" as set forth under Article 6(1)(i) of the Fair Trade Law, and as the volume of sales for the participating enterprises in the previous accounting year met the criteria for reporting listed under Article 11(1)(iii) of the Fair Trade Law, an application was therefore duly submitted.
2. Teco and Taian were primarily engaged in the manufacture of mechanical and electrical products, but the two companies had complementary product lines, so that after the merger, parts and components needed for the manufacture of Teco products could be directly sourced from Taian. The mutual integration brought by the merger, with the addition of extra areas of operation, expanded the potential consumer base of the company, and the further consolidation of support resources in the areas of administration, finance, legal affairs, general affairs, and taxation effectively lowered production and operating costs. A more complete product line was also anticipated, capable of giving consumers a one-stop offering of products to satisfy all their needs, raising operating efficiency and reducing unneeded duplication in resource allocation. Thus this merger would be beneficial in terms of overall economic benefit as well as in the internal economic benefit for the individual participating enterprises. Aside from frequency converter products, there was no competition between the main product lines of the two participating enterprises, and in the domestic market for frequency converters, no significant entry/exit barriers existed in regulatory, capital, tariff- or non-tariff related areas, while the required operating capital and fixed costs accounted for only a small share of overall costs, and the enterprises participating in the merger lacked the market power to exclude competition. In addition, the two participating entities were substantial affiliates, so that after the merger, they were unlikely to produce any further restraint of competition within the relevant markets.
3. Given the absence of concerns about restraint of competition, the FTC expressed no opposition to the merger, in accordance with Article 12(1) of the Fair Trade Law, which states, "The Central Competent Authority may not prohibit any merger filed if the overall economic benefit of the merger outweighs any disadvantages resulting from competition restraint."
Appendix:
Teco Electric and Machinery Co., Ltd.'s Uniform Invoice Number: 11332202
Taian Electric Co., Ltd.'s Uniform Invoice Number: 11819226
Summarized by Liou, Chi-Jung; Supervised by Shih, Chin-Tsun