Pxmart Co., Ltd filed a merger report regarding its intention to hold or acquire above one-third of the shares with voting rights of Valumart Co., Ltd. in accordance with Article 11 of the Fair Trade Law

Case:

Key Words:

general merchandise, supermarkets, merger

Reference:

Fair Trade Commission Decision of July 8, 2004 (the 661th Commissioners’ Meeting)

Industry:

Supermarkets (4752)

Relevant Laws:

Article 6 and 12 of the Fair Trade Law

Summary:

Pxmart Co., Ltd (hereinafter called “Pxmart”) planned to hold or acquire one-third of the shares with voting rights of Valumart Co., Ltd. (hereinafter called “Valumart”). Pxmart’s sales amount in the last fiscal year was over New Taiwan Dollars (NT$)10,000,000,000, and Valumart’s was over NT$2,600,000,000. In accordance with Article 11 of the Fair Trade Law (FTL), Pxmart filed a report of merger to this Commission.
According to the statistical data, in June 2004, Pxmart was a supermarket operator with the most stores (208) in Taiwan, with a market share of 24.62%, while Valumart only had 20 stores. Moreover, based on the Trade Statistic Monthly Report provided by the Ministry of Economic Affairs, the sales amount of Pxmart in 2003 was 21.33% of the supermarket industry, and 2.64% of the general merchandise industry. The sales amount of Valumart in 2003 was 3.2% and 0.4% of the supermarket industry and the general merchandise industry. Therefore, if the two enterprises merged, the market share will only have a slight increase. Besides, Pxmart will still have to confront with other competitors coming from the supermarket industry, retail outlets, franchise convenient stores, traditional markets, and traditional retail stores, and there are no entry barriers of laws or regulations, technology, or capital. The merger shall have no concerns of competition restraint to the supermarket industry and other general merchandise retail industries, and therefore, no competition barriers will be formed through the merger.
As for the upstream and downstream relationship, although Pxmart might have an elevated price negotiation power towards upstream companies due to the acquisition of Valumart’s shares; the merger will not increase the possibility that Pxmart abuses its market advantage towards the upstream companies, since Pxmart’s market shares of the supermarket industry and general merchandise industry are barely affected by the merger. In addition, there are many upstream companies with various and substitute products, and part of them also have advantages in their brands or have strong merchandise, thus, the merger indicated in this case shall not cause unfavorable impacts on the upstream and downstream relationship.
The operational area of Valumart is regional. When facing a strong competition with other retail outlets, franchise supermarkets and convenient stores, the competitiveness must be enhanced to pursue a perpetual development of the company. Through the merger with Pxmart, Valumart will be able to improve the operational environment of the company, develop its credibility and goodwill, and avoid business recession caused by the severe competition with the general merchandise industry. It can also utilize its operational shopping locations and enhance its procurement power and price negotiation power to allow consumers to enjoy the benefits of both the price and the quality brought by the economy of scale. Thus this merger shall have a considerable benefit to the entire economy.
In summary, the evaluation of this case indicates that the merger of Pxmart and Valumart will not cause significant negative influence on the competition structure of the relevant specific market. The overall economic benefit shall outweigh the disadvantages resulting from competition restraint. Pursuant to Article 12(1) of the FTL, the merger shall be granted.

Appendix:
Pxmart Co., Ltd.’s Uniform Invoice Number: 16740494
Valumart Co., Ltd.’s Uniform Invoice Number: 89927708

Summarized by Yang, Chung-Lin; Supervised by Chen, Yuhn-Shan

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