Chanlong Corporation's application to combine with Sanfu Paper Manufacturing Corporation Ltd.
Chinese Taipei
Case:
Chanlong Corporation's application to combine with Sanfu Paper Manufacturing Corporation Ltd.
Key Words:
approval of combination
Reference:
Fair Trade Commission Decision of January 13, 1999 (the 375th Commission Meeting); Decision (88) Kung Chieh Tzu No. 055
Industry:
Cardboard Manufacturing Industry (1823)
Relevant Law:
Article 6(1)(iii) of the Fair Trade Law
Summary:
This case involves the type of combination defined in Article 6(1)(iii) of the Fair Trade Law (FTL) where one of the parties of the combination "is the assignee or lessee of all or a major part of another enterprise's operations or assets." One of the combining enterprises, Chanlong Corporation (hereinafter "Chanlong"), had a turnover of some NT$13,514,140,000 in 1997. It therefore is required under Article 11(1)(iii) of the FTL to file an application for approval of combination when "one of the enterprises participating in the combination had sales for the preceding physical year exceeding the amount officially announced by the central competent authority." An application was therefore filed with the Fair Trade Commission.
Prior to the combination, Sanfu Paper Manufacturing Corporation Ltd. (hereinafter "Sanfu") was already an investee of Chanlong. Chanlong's current plan to purchase Sanfu's Tayuan plant constitutes a combination as defined in Article 6(1)(iii) of the FTL. It is understood that Sanfu's line of business includes the production and marketing of paper containers and processed paper goods, manufacture and marketing of paper tubes, and production, marketing, purchasing, and sale of paper. The Tayuan plant is a part of Sanfu's assets. Its primary product is corrugated cardboard and corrugated cardboard cartons. The plant grounds cover an area of 7,955.5 p'ing.(One ping is equal to 36 square feet.) The plant itself has a floor area of 5,896.3 ping. It has 138 employees. Its major machinery and equipment include a 2.2 meter imbricating machine, one 8 ch'ih (one ch'ih equals 1/3 meter) laid-paper printing guillotine and plaiter, one carton flat roller, one four-color press, one SIMCA stapling machine, and one nine ch'ih four-color printing guillotine back roller. Since Chanlong's Tayuan plant is located very close to Sanfu's Tayuan plant and both enterprises are in the same industry, the combination would capitalize on the aggregate benefits from the two plants' operations, decrease their costs, increase their productivity, and improve customer service. However, since the business strategies and objectives of these two enterprises would be the same before and after the combination, it is unlikely that the combination would create entry barriers for other enterprises.
Chanlong originally supplied 95 percent of Sanfu's raw paper. After purchasing Sanfu's Tayuan plant, Chanlong will continue to sell the raw papers to ensure steady input supply. As far as the paper container market is concerned, Chanlong's market share will be increased from 16.29% to 19.33%. However, since the raw materials for paper container could be easily obtained, the technology involved is not sophisticated, and there is no shortage of customers, the market is a perfectly competitive one and thus no restriction exists for enterprises to access the market. Moreover, the objective of the combination is to promote efficient upstream-downstream integration. It should have only a limited impact on the paper container market and will not restrain competition.
Summarized by Hu Chun-hsien
Supervised by Shih Chin-ts'un
Appendix:
Chanlong Corporation Ltd. Uniform Invoice No.: 33085508
Sanfu Paper Manufacturing Corporation Ltd. Uniform Invoice No.: 34472149