Fu Yang Investment Co., Ltd. violates the Fair Trade Law by failing to file a merger report

Case:

Fu Yang Investment Co., Ltd. violates the Fair Trade Law by failing to file a merger report

Key Words:

cable television; control of the operations, personnel decisions

Reference:

Fair Trade Commission Decision of March 25, 2004 (the 646th Commissioners' Meeting); Disposition (93) Kung Ch'u Tzu No. 093034

Industry:

Television Broadcasting (8620)

Relevant Laws:

Article 11 of the Fair Trade Law

1. The complainant stated that Hong Shu Lin Cable TV (hereinafter called "Hong Shu Lin") and Bei Hai An Cable TV (hereinafter called "Bei Hai An"), the only two cable television operators in the Taipei County cable TV zone around Tamsui, should be in the position of competition. In reality, however, the same juristic person, Fu Yang Investment Co., Ltd. (hereinafter called "Fu Yang") holds controlling power in both Hong Shu Lin and Bei Hai An. Moreover, the same situation existed regarding Sin He Cable TV (hereinafter called "Sin He") and Yong Jia Le (Yong Jia Le) Cable TV operating in the Taipei County cable TV zone around Sinjhuang. This was suspected to be a violation of the Fair Trade Law (FTL).
2. An inquiry by the Fair Trade Commission (FTC) found that between February 17, 2003 and 1 June of the same year, officers of Fu Yang held all of Hong Shu Lin's director and supervisor positions and the same was true for Bei Hai An, operating in the same cable TV zone around Tamsui. Furthermore, between March 12, 2003 and July 7 of the same year, officers of Fu Yang occupied all of the directors and supervisors positions at Sin He in Sinjhuang, while officers of the same company concurrently held all the directors and supervisors positions at Yong Jia Le, also operating in the Sinjhuang cable TV zone. Further inquiry found that there were also instances of overlapping personnel and joint operations in the case of the two Tamsui cable operators, while in Sinjhuang, Fu Yang operated more as a behind-the-scenes holding company, broadly supervising the cable TV operations of Sin He and Yong Jia Le as well as negotiating annual channel subscription contracts and conducted the hiring and firing of top executives.
3. Grounds for disposition:
   1. Fu Yang, through its control of the boards of directors and supervisors, has direct or indirect control of the operations and personnel decisions of Hong Shu Lin and Sin He, thereby meeting the criteria of a merger as defined in Article 6(1)(v) of the Fair Trade Law. Furthermore, Hong Shu Lin, with a 44.91 percent market share in the Tamsui cable zone, and Bei Hai An, in which Fu Yang holds a controlling interest and which has a 55.09 percent market share, are both in excess of the threshold requiring that a merger be reported under Article 11(1)(ii). Such a report should have been filed by the controlling enterprise, Fu Yang, prior to the merger. As for Sin He in the Sinjhuang cable zone, it holds a 23.53 percent market share, or just under a quarter of the market. Fu Yang, however, also held a controlling interest in the other cable TV system operator in the Sinjhuang zone, Yong Jia Le, which commanded a 76.47 percent market share, in excess of the threshold for reporting a merger under Article 11(1)(ii). In this case as well, a report should have been filed in advance by the controlling enterprise. Fu Yang, however, failed to file advance reports to the FTC of the mergers in both of the cable TV zones, in violation of the provisions of Article 11(1) of the FTL.
   2. After weighing the motive, purpose, anticipated improper gains, duration of harm to the trading order, gains obtained from the illegal acts, and the enterprise's business scale, market position and cooperativeness in the investigation, the FTC ordered Fu Yang to rectify the illegal practices or take necessary corrective measures and imposed an administrative fine of New Taiwan Dollars (NT$)500,000 in accordance with the Article 13(1) and Article 40(1) of the FTL.

Appendix:
Fu Yang Investment Co., Ltd.'s Uniform Invoice Number: 16741402