Chyun Jiann Co., Ltd. violated the Fair
Trade Law by failing to apply for the approval of a merger after it had been
transferred the cable television subscribers of Taijung CATV Co., Ltd. and Chang
Jung Cable TV Co., Ltd.
Chinese Taipei
Case:
Chyun Jiann Co., Ltd. violated the Fair Trade Law by failing to apply for
the approval of a merger after it had been transferred the cable television
subscribers of Taijung CATV Co., Ltd. and Chang Jung Cable TV Co., Ltd.
Key Words:
merger, cable television
Reference:
Fair Trade Commission Decision of January 5, 2000 (the 426th Commissioners'
Meeting )
Industry:
Television Industry (8520)
Relevant Laws:
Article 11(1)
of the Fair Trade Law
Summary:
- Some building management committees in Taichung alleged that Chyun Jiann
Co., Ltd., ("Chyun Jiann") has monopolized Taichung's cable television
program (transmission) system market and its behavior was in violation of
the Fair Trade Law. They alleged that, to acquire subscribers, Chyun Jiann
first lowered its subscriber fees, acquired Taijung CATV Co., Ltd., ("Taijung
CATV"), and Chang Hung Cable TV Co., Ltd., ("Chang Hung"),
and that it then raised its subscriber fees in June 1999.
- On 24 March 1999, in Taijung CATC's provisional shareholders' meeting,
a resolution was passed to strike business item number 3, "cable television
program transmission system operations," off the company's business items
amendment registration card. On 5 May 1999, the amendment was approved and
recorded by Taiwan Provincial Government's Department of Construction. On
27 January 1999, in Chang Hung's provisional shareholders' meeting, a resolution
was passed to dissolve and liquidate the company. On 10 February 1999, the
dissolution and liquidation was approved and recorded by Taiwan Provincial
Government's Department of Construction.
- On 1 January 1999, Taijung CATC and Chang Hung concluded separate agreements
to transfer the cable television transmission and related services to Chyun
Jiann. In the second half of March 1999, transmission and consumer dispute
services provision was transferred to Chyun Jiann. On 28 July 1999, Chang
Hung paid to Chyun Jiann NT$69,000,000 in pre-paid subscriber fees. Chyun
Jiann directly leased fiber optic cable that had previously been leased by
Taijung CATC and Chang Hung.
- In the Taichung's cable broadcast television operations area, there were
280,000 registered households, and 180,000 cable television subscribers. Furthermore,
of the above subscribers, Chyun Jiann had 55,000 subscribers, and a 30% market
share; Chang Hung had 65,000 subscribers, and a 36% market share; Taijung
CATC had 52,000 subscribers, and a 29% market share; and Chung T'ai Transmission
("Chung T'ai") had 3,000 subscribers, and a 3% market share. After
the transfer, Chyun Jiann had 170,000 subscribers and Chung T'ai had 3,500
subscribers.
- The Fair Trade Law regulates enterprise merger in order to prevent restraints
on competition and unfair competition resulting from the concentration of
economic strength in individual enterprises. Under the Fair Trade Law, if
a merger satisfies a specific threshold requirement, the enterprise must first
apply for approval with the Fair Trade Commission (the "Commission").
In the case of cable television (transmission) enterprises, if income from
their television signal services accounts for 90% or more of their total income,
it can be deemed with certainty that television signal services are the major
part of their operations. The source of that income is derived from the number
of subscribers and unit subscription fees. As a result, the transfer of subscriber
rights and obligations of related enterprises constitutes the transfer of
the major part of their operations. This is also sufficient to cause related
enterprises to experience external economies. As the subscribers of a cable
television (transmission) system enterprise directly affect its main income
and costs, the number of subscribers is extensively used by agencies and organizations
in the determination of the market share of a cable television (transmission)
system enterprise. Therefore, the transfer of Taijung CATC and Chang Hung's
subscriber rights and obligations to Chyun Jiann constituted a merger under
Article 6(1)(iii) of the Fair Trade Law. Before the merger, Chyun Jiann, Taijung
CATC and Chang Hung's had market shares of 30%, 26%, and 36%, respectively.
After the merger, Chyun Jiann had a market share of at least 90%. This satisfied
the threshold requirements under Articles 11(1)(i) and 11(1)(ii) of the Fair
Trade Law with respect to the circumstances under which "enterprises
that merge shall file an application" with the Commission for approval.
But, as Chyun Jiann failed to file an application up until the time of the
Commission's investigation, it violated Article 11(1) of the Fair Trade Law.
- After weighing the companies' motives, the duration of their acts, the
benefits obtained by them, their scale and market position, their degree of
cooperation with the investigation, the degree of harm caused to the trading
order, as well as considering that the companies subsequently, on their own
initiative, filed an application for the approval on the merger with the Commission,
the Commission fined Chyun Jiann NT$2,400,000 and Taijung CATC NT$800,000
pursuant to Article 40 of the Fair Trade Law.
Appendix:
Chyun Jiann Co., Ltd.'s Uniform Invoice Number: 89685716
Chang Hung Cable TV Co., Ltd.'s Uniform Invoice Number: 84845727
Taijung CATV Co., Ltd.'s Uniform Invoice Number: 86182789
Summarized by Liu Hsi-jug
Supervised by Hu Kuang-yu
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