Merger between China American Petrochemical Co., Ltd., and Tuntex Petrochemical Inc.

Chinese Taipei


Case:

Merger between China American Petrochemical Co., Ltd., and Tuntex Petrochemical Inc.

Key Words:

China American Petrochemical Co., Ltd.; Tuntex Petrochemical Inc.; petrochemicals

Reference:

Fair Trade Commission Decision of April 6, 1999 (the 387th Commission Meeting); Letter (88) Kung Chieh Tzu No. 276

Industry:

Petrochemical Manufacturing (2112)

Relevant Law:

Article 11 of the Fair Trade Law

Summary:

  1. China American Petrochemical Co., Ltd., filed an application with the Fair Trade Commission on February 9, 1999 to own 60% of the shares of Tuntex Petrochemical Inc. The proposed merger satisfied the requirements of Article 6(1)(ii), and Articles 11(1)(i), 11(1)(ii) and 11(1)(iii), and thus an application was filed in accordance with Article 11(1) of the Fair Trade Law. The revenue of China American Petrochemical in 1988 was NT$10.3 billion while that of Tuntex Petrochemical was NT$5.3 billion, which satisfied the provision of Article 11(1)(iii).

  2. After evaluation and assessment, the proposed combination had the following overall economic benefits: to ensure the competitiveness of the domestic PTA market, to lower production costs, to ensure material supply from downstream suppliers, and to ensure the sustainable operation of the Tuntex Group.

  3. Downstream suppliers such as Du Pont Far Eastern Petrochemical Co., Ltd., and Chung Shing Textile Co., Ltd., raised concerns that the merger would restrict competition. For instance, China American Petrochemical would, as a result, have more control over market prices, causing prospective newcomers to make more cautious assessments before entering the market. However, the Fair Trade Commission considers that in terms of the market situation, Formosa Chemicals and Fiber Corporation still had excess production capacity, and market supply was not a problem. Thus the market itself could balance out the aforementioned adverse impacts. Formosa Chemicals and Fiber Corporation would take over the competition once provided by Tuntex Petrochemical, and the resulting effect on market competition would be minimal.

  4. Upon assessment, the overall economic benefits of the combination were found to be greater than the resulting disadvantages in terms of restraints on competition, so the combination was approved in accordance with Article 12 of the Fair Trade Law.

Summarized by Peng, Hui-chu

Supervised by Li, Yen-hsi


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