Yieh Hsing Enterprise Co., Ltd. and Yieh United Steel Corporation filed a merger report regarding its intention to merge with each other

Case:

Yieh Hsing Enterprise Co., Ltd. and Yieh United Steel Corporation filed a merger report regarding its intention to merge with each other

Key Words:

merger, vertical integration

Reference:

Fair Trade Commission Decision of April 1, 2004 (the 647th Commissioners’ Meeting)

Industry:

Steel Wires and Cables Manufacturing (2314)

Relevant Laws:

Article 6(1)(i) , 11(1)(iii),and 12(1) of the Fair Trade Law

1. Yieh Hsing Enterprise Co., Ltd. (hereinafter called “Yieh Hsing”) planned a merger with Yieh United Steel Corporation (hereinafter called “Yieh United”) through a merger in which Yieh Hsing was to be the surviving company and Yieh United, whose name was used after the merger, the extinguished company. Yieh Hsing and Yieh United thus duly filed a merger report to the Fair Trade Commission (FTC).
2. This case fell into the category of mergers defined as “mergers with other enterprises” under Article 6(1)(i) of the Fair Trade Law (FTL). As Yieh United and Yieh Hsing respectively had sales volumes of New Taiwan Dollars (NT$) 48,939,154,000 and NT$6,409,930,000 during the previous accounting year (2003), meeting the threshold at which reporting is required under Article 11(1)(iii) of the FTL, and as the exemptions under Article 11-1 of the same law did not apply, the FTC found that the duly filed application with annexed relevant application documents complied with Article 8 of Enforcement Rules to the FTL, and accepted it for processing.
3. Grounds of no prohibited.
   1. Yieh Hsing was primarily engaged in manufacturing and selling stainless steel wires, alloy steel rods, free cutting steel rods, carbon steel rods, and stainless steel tubes; Yieh United, in manufacturing and selling hot rolled and cold rolled stainless steel sheets in coil/plates and stainless steel billets. The two enterprises had a buyer/seller relationship in that Yieh United provided raw materials to Yieh Hsing for its manufacturing of stainless steel wires and tubes, and their merger would achieve synergy through vertical integration. The domestic iron and steel industry was facing strong competition from overseas enterprises as a result of the continual lowering of import duties on steel products after Taiwan’s accession to the World Trade Organization and the world-wide trend toward acquisitions, mergers, and strategic alliances among iron and steel plants. The merger was deemed to be of overall economic benefit, because it would help the participating enterprises to face the competitive pressures of the global steel products market, drive the global competitiveness of domestic upstream and downstream enterprises, and strengthen the global competitive standing of domestic stainless steel enterprises.
   2. The enterprises participating in the merger operated in a completely deregulated market in Taiwan, free of regulatory, capitalization, or tariff barriers to market access. The two enterprises lacked the market power to exclude competition, and were already substantial affiliates before the merger, so the merger was unlikely to produce any restraint on market competition.
   3. Considering that the overall economic benefit of the merger was greater than any disadvantage in terms of restraints on competition, the FTC, in accordance with Article 12(1) of the FTL, did not prohibit the merger.

Appendix:
Yieh Hsing Enterprise Co., Ltd.’s Uniform Invoice Number: 75992214
Yieh United Steel Corporation’s Uniform Invoice Number: 23218395