Application for a combination through franchising by Taiwan McDonalds Ltd.
Chinese Taipei
Case:
Application for a combination through franchising by Taiwan McDonalds Ltd.
Key Words:
franchising
Reference:
Fair Trade Commission Decision of March 10, 1999 (383rd Commissioner Meeting); Decision (88) Kung Chieh Tzu No. 194
Industry:
Other Restaurant (5719)
Relevant Law:
Articles 6(1)(v) and 11(1)(iii) of the Fair Trade Law
Summary:
This case involves the first time that Taiwan McDonalds Ltd. (Taiwan McDonalds) applied for a combination using a franchise approach. As such franchising transfers operation of an existing directly operated store to a franchisee, the market share of the company before and after the combination does not change and therefore does not change market structure. After the combination, Taiwan McDonalds may, together with persons in local enterprises, jointly operate McDonalds restaurants benefiting financial planning of Taiwan McDonalds and letting foreign enterprises enter local communities. Taiwan McDonalds could continue to develop potential business relationships indirectly helping local economies to prosper benefiting overall economic development. The Fair Trade Commission (FTC) therefore approved the combination pursuant to Article 12 of the Fair Trade Law (FTL).
According to the FTC decision made in the 56th Commission Meeting, combinations using a franchise approach, pursuant to Article 6(1)(i) of the FTL, are where " a business operation or appointed person directly or indirectly controls another enterprise." In this case, the controlling enterprise, Taiwan McDonalds, after the combination, in the previous fiscal year had operating revenues of NT$10.7 billion meeting the threshold of NT$5 billion pursuant to Article 11(1)(iii) of the FTL. Therefore, it applied with the FTC for permission to engage in a combination.
According to monthly statistical reports of the Ministry of Finance (MOF), in 1997, food and beverage operating revenues in Chinese Taipei was NT$147.9 billion while that of Taiwan McDonalds was NT$10.5 billion. At the time, Taiwan McDonalds had a market share of 7.26% and was already a famous and powerful brand in the global fast food business. Taiwan McDonalds had a definite position in the food and beverage market in Chinese Taipei.
In summary, the combination would not hinder development of the overall economy and the economic advantages would outweigh disadvantages arising from restricting competition. Therefore the FTC approved the combination pursuant to Article 12 of the FTL.
Summarized by Lin He-lang
Supervised by Hung Te-chang
Appendix:
Taiwan McDonald' s Ltd.'s Uniform Invoice No.: 12411160