Approval of enterprise combination jointly applied for by Yulon Motor Co., Ltd. and China Motor Co., Ltd. for their combination with R.O.C. Spicer Ltd. [Spicer]
Chinese Taipei
Case:
Approval of enterprise combination jointly applied for by Yulon Motor Co., Ltd. and China Motor Co., Ltd. for their combination with R.O.C. Spicer Ltd. [Spicer]
Key words:
combination, commercial vehicles, transmission shaft, parts and components, buyer's market
Reference:
Fair Trade Commission Decision of 11 February 1998 (the 327th Commission Meeting); Decision (87) Kung Chieh Tzu No.065; Letter (87) Kung Erh Tzu No. 8614554-050
Industry:
Automobile Manufacturing Industry(3231)
Relevant Laws:
Article 12 of the Fair Trade Law
Summary:
This matter began with Yulon and China Motor's plan to acquire respectively 20.01% and 29% of Spicer's shares. One half or more of the directors of Yulon and China Motor were the same. Both Yulon and China Motor had an annual business volume of over NT$30 billion. The two companies planned to join their efforts to obtain 1/3 or more of Spicer's shares, which action fell under Article 6(1)(ii) of the Fair Trade Law regarding combination of enterprises. The two companies must file an application for approval for their combination in accordance with the Fair Trade Law.
The rear axles and transmission shafts manufactured by Spicer were key components of small-sized commercial vehicles. Spicer was the only local manufacturer of the two components. Major local manufacturers of small-sized commercial vehicles depended on Spicer's supply of the two components. Theoretically, there was a likelihood of restriction of competition. However, this Commission 's investigation shows the shares Yulon and China Motor planned to obtain jointly were originally held by Spicer's local shareholders. Spicer's local shareholders, either corporate or individual, had either engaged in extensive mutual investment with Yulon and China Motor or served as directors or supervisors for the two companies. Therefore, the combination in question is merely an internal shareholding transfer between Spicer's local corporate shareholders.
According to the evaluation opinion by the Ministry of Economic Affairs' Industrial Development Bureau and related trade associations, Spicer's output capacity and equipment in relation to the two components had not yet reached any sizable scale, and Spicer must continue its market development in order to reduce the average cost. The domestic market for automobile parts and components had been an open market with buyers' position higher than those of suppliers. Spicer's foreign shareholders were still holding as much as 50.5% of Spicer's shares. The applicants in the instant case pointed out in their supplementary statement that, after the combination [is approved], Spicer would continue to follow international practices and treat its customers reasonably. It is considered unlikely that Spicer will either take unreasonable action against domestic manufacturers of small-sized commercial vehicles or engage in discriminatory treatment. There should not be any obvious restriction on competition in the domestic small-sized commercial vehicle market.
Following Chinese Taipei's accession to the WTO, customs duties on imported automobile parts and components will be reduced, and the market will become more liberalized. Therefore, it is hoped that this combination will benefit all sides: Yulon Group may take advantage of the combination to integrate its resources; Spicer will have access to Yulon and China Motor's international resources to develop its overseas market and expand the scale of its manufacturing; Spicer's cost of manufacturing rear axle and transmission shafts for small-sized commercial vehicles could be reduced; and domestic manufacturers of small-sized commercial automobiles could strengthen their competitiveness due to the cost reduction.
Given the above analysis, approval of this combination should not cause restriction on competition either in the domestic small-sized commercial vehicle market or the market of rear axle and transmission shaft for the vehicle. Instead, it may produce direct benefits to the overall economy. This Commission hereby approves the combination in accordance with the Article 12 of the Fair Trade Law.
Summarized by Liu, Nai-jung
Supervised by Yu, Su-su
Appendix:
Yulon Motor Co., Ltd.' s Uniform Invoice No.: 03489200
China Motor Co., Ltd.' s Uniform Invoice No.: 43680739