Application for approval of combination by President Enterprises Corporation Limited and 21Century Quickly Restaurant Service Company Limited
Chinese Taipei
Case:
Application for approval of combination by President Enterprises Corporation Limited and 21Century Quickly Restaurant Service Company Limited
Key Words:
fast-food diners, combination
Reference:
Fair Trade Commission Decision of December 2, 1998 (369th Commission Meeting); Decision (87) Kung Chieh Tzu No. 738
Industry:
Western Restaurant Business (5712)
Relevant Laws:
Articles 6(1)(ii), and 11(1)(iii) of the Fair Trade Law
Summary:
President Enterprises Corporation Limited (the applicant) acquired from Teng Ah Hua 13,750,000 shares of 21 Century Quickly Restaurant Service Company Limited (21 Century), amounting to 72.4% of the company's share holdings and more than 1/3 of its voting rights. The acquisition meets the definition of "combination" under Article 6(1)(ii) of the Fair Trade Law (FTL) which provides: "...an enterprise...holds or acquires the shares or capital contributions of another enterprise to the extent of representing more than one-third of the total voting shares or the total capital stock of such other enterprise..." In addition, the applicant's sales for the 1997 fiscal year were NT$26,644,480,000, an amount that has met the standard stipulated in FTL Article 11(1)(iii) which provides: "The amount of sales in the preceding fiscal year of an enterprise participating in the combination exceeds the amount publicly announced by the central competent authority" (and is therefore required under FTL Article 11(1) to file an application for approval from the authority.) Accordingly, the applicant files the application for approval of the combination pursuant to FTL Enforcement Rule Article 7(1)(ii) which provides: "Application for an approval of a combination of enterprises...shall be filed...by the holding or acquiring enterprise, where an enterprise holds or acquires shares or the capital contribution of another enterprise;...."
With regard to the business of the two enterprises participating in the combination, the applicant's main business items include the importation of bulk cargo, food, and the processing/ production/sales/distribution of food. The main products and their respective market share are: fresh milk and flavored milk 17%; non-alcoholic beverages 8%; fodder 7%; flour 7%; ground beans 7%; and oil for human consumption 5%. 21 Century is in the business of western fast-food service, holding a market share of merely 2%. Therefore, the two enterprises are in different relevant markets and obviously their combination should be regarded as one involving enterprises in two different industries. The combination would not lead to any change in the degree of market concentration at the relevant market of the importation of bulk cargo, food, processing/ production/sales/distribution of food, the western fast-food restaurant or even the related upstream and downstream products, and should not thereby hamper market competition. In addition, as the applicant is a listed company, its re-investment in 21 Century made on the consideration of business diversification has the effect of dispersing risks, increasing its business income, and will be beneficial to its investors. Moreover, the combination may enable the participating enterprises to meet the fierce market competition after this country's entry into the WTO and could improve the quality of providing food service to the general public.
In conclusion, the combination will not result in any restriction on market competition in the relevant markets. Nor will it disadvantage the economy as a whole. In addition, the combination is qualified as a combination which "will not result in the increase of market share and will not affect the relevant market" under Item 3 of the Rules of Simplified Screening of Applications for Approval of Combination. It is the view of this authority that the combination will increase the competitiveness of the participating enterprises without placing obvious restrictions on market competition, and its benefits for the economy will outweigh its disadvantages accordingly. The combination is approved in accordance with FTL Article 12.
Summarized by Lin, Yi-Chao
Supervised by Hung, Teh-Chang
Appendix:
President Enterprises Co., Ltd.' s Uniform Invoice No.: 73251209
21Century Quickly Restaurant Service Company Ltd.' s Uniform Invoice No.: 89627033