Complaint Against Monopoly by Shih Hsin Broadcast System Co., Ltd
Chinese Taipei
Case:
Complaint Against Monopoly by Shih Hsin Broadcast System Co., Ltd
Key Words:
cable television, combination, entrusted operation
Reference:
Fair Trade Commission Decision of May 14, 1997 (the 289th Commission Meeting); Disposition (86) Kung Ch'u Tzu No. 095
Industry:
Cable Television Industry (8520)
Relevant Laws:
Summary:
1.Facts of the Case:
A number of Chiayi residents brought complaints to this Commission against the monopoly and unreasonable price increase by Shih Hsin in Chiayi City. According to the complaints, there had been several cable system operators in Chiayi; however, the number of such operators was reduced to two in recent years, namely Shih Hsin Co., Ltd. and Chu Luo Shan Democratic Co., Ltd. The two companies recently combined and there is now only one operator, Shih Hsin, in the market. Shih Hsin then increased the monthly subscription fee to NT$600 and unilaterally reduced the number of channels and programs.
2.Findings and Decisions:
(1)There are currently two cable operators, namely Shih Hsin and Chu Luo Shan, in the cable broadcast market in Chiayi City. According to the statements of these operators, they are competitors operating in the same industry.
(2)Although both Shih Hsin and Chu Luo Shan claim that they are independent companies, they also admitted that Chu Luo Shan, which was not successfully operates, has reached a non-competition agreement with Shih Hsin and raised its monthly subscription fee to NT$600 on January 1, 1997. Chu Luo Shan also entrusted part of its operations, such as purchase of programs, reception and transmission of satellite channels, and maintenance of part of its circuits, to Shih Hsin. Although the two companies are competitors, their fixing of a standard fee through negotiation seems, on its face, have constituted a concerted action defined in Article 7 of the Fair Trade Law.
(3)Although the combination of enterprises sometimes gives the impression of concerted actions due to the joint operations of the enterprises concerned, there is a fundamental difference, however, between a combination and concerted actions. The relationship between the two companies at issue should be classified a type of combination under Article 6(1)(iv) of the Fair Trade Law, i.e., a combination where an enterprise "frequently operates jointly with another enterprise or is entrusted by another enterprise to operate the latter's business." The purchase of programs, reception, transmission and maintenance of equipment are indispensable elements of the operation of a cable broadcast operator. Chu Luo Shan has entrusted the above operations to Shih Hsin and currently only deals with the production of local news programs and maintains part of its equipment. Therefore, it is a fact that the company has entrusted its vital business to another enterprise. With respect to the entrusted business, although the "cooperation" between Shih Hsin and Chu Luo Shan does not constitute a merger, such act is by nature subject to Article 6(1)(iv) of the Fair Trade Law, which provides as a type of combination where one enterprise "frequently operates jointly with another enterprise or is entrusted by another enterprise to operate the latter's business." As for the external concerted pricing mentioned above, it should be regarded as an act resulting from the combination of the enterprises.
(4)In accordance with the conclusions of the Commission Meeting on November 22, 1996 (on Fair Trade Law issues relating to the partition and integration of regional cable television markets) and the relevant decisions of the 269th Commission Meeting, this Commission defers to the policy of the Government Information Office in encouraging integration of such operators and refrains from punishing the regional integration of cable companies which were completed prior to December 31, 1996 and satisfied the requirements of the Fair Trade Law but failed to apply to this Commission In this case, the two companies are independent operators without merging with each other, according to Shih Hsin's statement of March 17, 1997. In addition, the fee standard of Chu Luo Shan was originally different from that of Shih Hsin. However, Chu Luo Shan raised the monthly subscription fee to NT$600 on January 1, 1997. Based on the foregoing facts, the "integration" between the two operators was not completed prior to December 31, 1996. Furthermore, the state of entrusted operation between the two has been in place after January 1, 1997; therefore, this Commission has to decide this case pursuant to applicable laws.
(5)The combination of Shih Hsin and Chu Luo Shan resulted in their 100% market share. Even according to the statement of each operator, the market share of each operator is above 25%. It is for this reason that although the business volume of each company for the previous fiscal year did not exceed the threshold of NT$2 billion announced by this Commission, their market shares met the conditions set forth in Articles 11(1))(i) and (1)(ii) of the Fair Trade Law, which require them to apply to this Commission for approval. However, the enterprises at issue have not applied for their combination pursuant to the Law.
(6)Because the companies at issue have failed to apply for their combination pursuant to the Fair Trade Law, a decision is rendered hereby prohibiting their unlawful combination pursuant to Article 13(1) of the Fair Trade Law and imposing on each of the companies a fine of NT$100,000 pursuant to Article 40 of the Law.
Summarized by Cheng, Pung-chi
Supervised by Ch'en, Ming-huang
Appendix:
Shih Hsin Broadcast System Co. Ltd.'s Uniform Invoice Number: 84075567
Chu Luo Shan Co., Ltd.'s Uniform Invoice Number.: 82754491
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