Combination of Chuan-lien CATV Co., Ltd. and Zhin-kwan CATV Co., Ltd.
Chinese Taipei
Case:
Combination of Chuan-lien CATV Co., Ltd. and Zhin-kwan CATV Co., Ltd.
Key Words:
combination, merger, cable television
Reference:
Fair Trade Commission Decision of November 25, 1998 (368th Commission Meeting); Disposition Ref. (87) Kung Ch'u Tzu No.
Industry:
Broadcasting and Television Industry (8530)
Relevant Laws:
Summary:
In accordance with Article 11 of the Fair Trade Law (FTL), Chuan-lien CATV Co., Ltd. and Zhin-Kwan CATV Co., Ltd. filed an application on July 30, 1998 for approval of their combination under FTL Article 6(1).
The application was complete with relevant documents. Taking into account the opinions of the competent authorities, i.e. the Government Information Office (GIO) and the Information Office of Taipei County Government, the Fair Trade Commission in the 368th Commission Meeting made the following decision:
(1) The combination is beneficial to the overall economy based on the following considerations:
It may effectively reduce operation costs.
The GIO had contracted National Chung Hsing University to conduct a research on the division of operation areas for cable television in Chinese Taipei. The current divisions are put into existence in accordance with the result of the research: the minimum scale for each operation area should be one that consists of 150,000 subscribers. Such an operation area, however, may be too small if there are several cable systems in the same area. In addition, given the limited operation areas for cable systems under the Cable Television Law and the high fixed costs for equipment such as cable and headend, the average cost could be reduced if the combination between Chuan-lien and Zhin-kwan could effectively expand their scale of operation.
It may avoid the waste of social resources.
Both Chuan-lien and Zhin-kwan are in the San Chung operation area. The combination may save the two companies from making redundant investments in network infrastructure and layout. It will not only help improve the outlook of the city but also avoid the waste of social resources.
It could save subscribers the costs of switching cable systems.
Zhin-kwan has not invested in cable infrastructure. According to Article 69(3) of the Cable Television Law, from the day a legally established cable system begins to broadcast programs, Zhin-Kwan must stop broadcasting immediately. If Zhin-kwan does not combine with a legally established cable system, it will have to refund its 20,000 or so subscribers. However, Zhin-kwan has been operating at a loss as of 1997. Making refunds to its subscribers will not only place it in financial difficulties but also put subscribers' rights and interests in jeopardy. With regard to the need of Zhin-kwan's original subscribers for a new cable system, Chuen-lien, i.e. the surviving company after the combination, may take over Zhin-kwan's subscribers and thereby substantially save subscribers the cost of switching cable systems. For those subscribers who opt to be refunded and switch to other cable systems, they are permitted to do so under the Cable Television Law. Furthermore, it is claimed by the applicant that Chuan-lien will continue to provide service to Zhin-kwan's subscribers until the day their subscription expire. In cases that subscribers find its service dissatisfactory, they will have the option to be refunded as well.
(2) Based on the following reasons, the combination imposes no substantial restriction on market competition:
Although the combination will increase the degree of market concentration at the operation area, yet there is other cable system engaging in the operation of cable TV at the same area. For subscribers, alternatives remain. It is unlikely that the combination will result in monopolistic operation. Moreover, the chargeable fees by the cable systems should be reported to and approved by the GIO according to Article 43 of the Cable Television Law. The applicant will not be able to engage in improper price determination either. Therefore, the combination will not impose substantial disadvantages on the subscribers.
Despite that there will be only two cable systems in the operation area after the combination, it would be inappropriate to liken the market structure of the cable TV industry to those of others when the number of cable TV operators are restricted and cross-franchise operation prohibited under current laws which inevitably will lead the market structure to be rather concentrated. In addition, when competition in the market of the operation area is eliminated, the GIO may re-invite applications for the establishment of cable systems according to Article 11 of the Enforcement Rules of the Cable Television Law to maintain market competition.
Except for the saving of subscribers' costs arising from the switch to other cable systems and thereby the protection of their interests, the rest of the benefits brought about by the combination will mostly belong to the applicant. The applicant claimed, however, that they will endeavor to expand its network to upgrade the quality of visual and sound signals, to increase the percentage of company-made programs, and to achieve various goals including the upgrading of the company's information technology, providing faster and better-quality service, and offering more diversified and localized programs after the combination. Should these goals be realized, the benefits from the combination that originally belong to Chuan-lien can be externalized to benefit consumers and the society as a whole.
(3) In conclusion, the combination is approved in accordance with FTL Article 12 as it does not substantially restrict competition. Nor does it impose any adverse impact on the entire economy. Nevertheless, if there involves any additional vertical combination, Chuan-lien is under the obligation to file an application for further approval in accordance with FTL Articles 6 and 11.
Summarized by Cheng, Peng-Chi
Supervised by Hsin, Chih-Chung
Appendix:
Chuan-lien CATV Co., Ltd.' s Uniform Invoice No.: 96973620
Zhin-kwan CATV Co., Ltd.' s Uniform Invoice No.: 96976366