Allegedly unlawful mergers by New Taipei Cable TV Co., Ltd. and Liguan Cable TV Co., Ltd. in the Neihu operation zone and Daanvnsang Cable TV Co., Ltd. and Wonderful Cable TV Co., Ltd. in the Da-an operation zone of Taipei

Case:

Allegedly unlawful mergers by New Taipei Cable TV Co., Ltd. and Liguan Cable TV Co., Ltd. in the Neihu operation zone and Daanvnsang Cable TV Co., Ltd. and Wonderful Cable TV Co., Ltd. in the Da-an operation zone of Taipei

Key Words:

cable television, merger

Reference:

Fair Trade Commission Decision of April 1, 2004 (the 647th Commissioners' Meeting); Dispositions (93) Kung Ch'u Tzu No. 093037 and 093038

Industry:

Television Broadcasting (8620)

Relevant Laws:

Article 06, 11, 13, 40 of the Fair Trade Law

Summary:

1. The complainant in this case alleged that the ET Group and the Koos Group had unlawfully exchanged operation zones, alternated customer service personnel, and adopted identical fees and channel selections, impairing the legal rights and interests of cable subscribers. Also, on February 26, 2003, the Taipei City Government Department of Information referred a case to this Commission by letter regarding allegedly unlawful combinations by New Taipei Cable TV Co., Ltd. (hereinafter called "New Taipei Cable") and Liguan Cable TV Co., Ltd. (hereinafter called "Liguan Cable") and by Daanvnsang Cable TV Co., Ltd. (hereinafter called "Daanvnsang Cable") and Wonderful Cable TV Co., Ltd. (hereinafter called "Wonderful Cable") under its supervision.
2. Findings of the Fair Trade Commission (FTC) after investigation:
   1. The account information of New Taipei and Liguan Cable in the Neihu operation zone of Taipei revealed that, from July 1, 2002 to April 30, 2003, the cable system operators (CSOs) had frequent transactions between them, including for the transfer and sales of installation materials, sharing of telephone expenses, cancellation of erroneous accounts, abnormal installation fees with respect to number of subscribers, and transactions in materials and equipment. Daanvnsang Cable and Wonderful Cable in the Da-an operation zone of Taipei, for their part, also had frequent transactions between them from July 1, 2002 to March 31, 2003, including for the transfer and sales of installation materials, lease of optical network systems, cancellation of erroneous accounts, and transactions in materials and equipment. As the CSOs in these cases did not belong to the same consortia, and were competitors in the same zone, the aforementioned business transactions were beyond the scope of normal business transactions between same-industry enterprises, and were subject to provisions for combination under Article 6(1)(iv) of the Fair Trade Law (FTL) that an enterprise "frequently conducts business operations jointly with another enterprise, or is entrusted with the operation of another enterprise."
   2. There were two cable systems in the Neihu operation zone, New Taipei Cable and Liguan Cable. At the end of September in 2003, there were 124,834 subscribers in that zone, among which 88,781 (71%) were New Taipei Cable subscribers and 36,053 (29%) were Liguan Cable subscribers. There were also two cable systems in the Da-an operation zone of Taipei, Daanvnsang Cable and Wonderful Cable. Up to the end of September in 2003, there were 122,108 subscribers in that zone, among which 63,031 (52%) were Daanvnsang Cable subscribers and 59,077 (48%) were Wonderful Cable subscribers. The CSOs in each case had already met the market share threshold requiring the filing of a report of merger ("one of the enterprises participating in the combination has a one-fourth [or greater] share of the market") under Article 11(1)(ii). As they frequently conducted business operations jointly with the other CSO, or were entrusted with the operation of the other to provide cable television broadcasting services, they were subject to the provisions of Article 11 of the Fair Trade Law and Article 7 of the Enforcement Rules to the FTL requiring enterprises participating in a merger to file a prior report with the FTC.
   3. During the August 8, 2002 review by the 561th Commissioners' Meeting of the filing for the projected merger by New Taipei Cable and Liguan Cable, the FTC resolved to prohibit the merger, finding that the resultant disadvantages in terms of restricting competition would be greater than the overall economic benefits. During the investigation, the four CSOs in question admitted that, not anticipating that the merger would be prohibited, they commenced a stage-by-stage adjustment in their management teams as early as June 2002, covering administrative, personnel, customer services, and business operations. It was not until the merger filing was prohibited by the FTC that they began to negotiate among themselves to restore the already completed or in-progress merger matters to their original status.
3. Grounds for disposition:
   1. As New Taipei Cable and Liguan Cable in the Heihu operation zone and Daanvnsang Cable and Wonderful Cable in the Da-an operation zone frequently conducted joint business operations with each other or were entrusted by each other to operate and provide cable television broadcasting services, they were required to file a report for merger under Article 6(1)(iv) of the FTL. In addition, as their market shares already exceeded the threshold requiring submission of a merger filing under Article 11(1)(ii) of the same law, they were required to file a prior report with the FTC under Article 7 of the Enforcement Rules to the FTL. Despite the statutory requirements, New Taipei Cable and Liguan Cable proceeded with the merger during the waiting period for approval, an act in violation of Article 11(3) of the FTL. Daanvnsang Cable and Wonderful Cable, for their part, violated Article 11(1) of the FTL by combining without duly filing a prior report.
   2. After weighing the motives, purposes, and expected improper benefits of the unlawful acts, the degree and duration of harm to trading order, the improper benefits obtained, the business scales and market positions of the enterprises, past violations, and their attitudes after the violation, the FTC ordered the four CSOs to rectify the acts or otherwise take necessary corrective measures and imposed an administrative fine of NT$500,000 on each under Article 13(1) and Article 40(1) of the FTL.
      

Appendix:
New Taipei Cable TV Co., Ltd.'s Uniform Invoice Number: 97167238
Liguan Cable TV Co., Ltd.'s Uniform Invoice Number: 97173512
Daanvnsang Cable TV Co., Ltd.'s Uniform Invoice Number: 97172470
Wonderful Cable TV Co., Ltd.'s Uniform Invoice Number: 97173392