Merger of Webs-TV Digital International Co., Ltd. and Blockbuster BEI Taiwan Limited

Case:

Key Words:

video rental, online viewing

Reference:

Fair Trade Commission Decision of December 21, 2006 (the 789th Commissioners' Meeting)

Industry:

Renting of Video Tapes and Disks (7732), Telecommunications (6100)

Relevant Laws:

Article 12(1) of the Fair Trade Law

Summary:

1. Webs-TV Digital International Co., Ltd. (hereinafter called "Webs-TV") filed a merger report to the FTC regarding its intention to merge with Blockbuster BEI Taiwan Limited (hereinafter called "Blockbuster") on November 21, 2006. Webs-TV mainly provided online video and audio viewing services while Blockbuster mainly provided rentals and sales of home video and audio products. Since Blockbuster had more than 1/4 of market share of domestic video rental market, this merger shall meet the merger threshold set forth in the Fair Trade Law and the participating enterprises shall file a merger report to the FTC.
2. Findings of FTC after investigation: Though this merger had the nature of a conglomerate merger, the merger was mainly involved with the change of share structure of Blockbuster's parent company. It did not cause any decrease in numbers of current competitors in the video rental market or change market concentration. However, if the eight American movie companies authorized online video and audio service companies, such as Webs-TV, to allow viewers to view or download movies online, online viewing services and the actual distribution would be combined. In other words, the participating enterprises of this case would have horizontal competition.
3. Grounds for non-prohibited: Upon discussion and analyses, the FTC felt that neither video rental market nor online viewing market had entry barriers. Even if online viewing services and the actual distribution combined in the future, the enterprises would still have to face potential competitors or existing competitors, such as Asia1, in the video rental market after the merger; while facing competitors or potential competitors operating online added-value services, such as Chunghwa Telecommunications, in the online viewing market. It would be difficult for the participating enterprises to be exempt from the restraint of market competition and to raise product prices or service remuneration. In addition, since the entry barriers were not yet too difficult for the competitors, the competitors would not be able to restrict each other's business activities or take concerted action. Middle and upstream enterprises would still be limited by the license and licensing amount set by the video agencies and movie production companies. As a result, the participating enterprises of this merger shall not have obvious competition restraints to the relevant markets. Since the benefits to the overall economy should outweigh the disadvantages of competition restraints, the FTC shall not prohibit such merger in accordance with Article 12(1) of the Fair Trade Law.

Appendix:
Webs-TV Digital International Co., Ltd.'s Uniform Invoice Number: 70552271
Blockbuster BEI Taiwan Limited's Uniform Invoice Number: 97176362

Summarized by Hsu, Tzung-Yu; Supervised by Lu, Li-Na