Yahoo! Taiwan Inc. ＆ Wretch

Case:

Key Words:

merger, Internet information providing services

Reference:

Fair Trade Commission Decision of March 29, 2007 (the 803rd Commissioners' Meeting); Letter (96) Kung Jye Tzu No. 096003 issued on April 12, 2007

Industry:

Web Portals (6311)

Relevant Laws:

Article 6 ,11and 12 of the Fair Trade Law

Summary:

1. Yahoo! Taiwan Inc. (hereinafter called "Yahoo!") planned to acquire 100% shares of Wretch from its current stockholders and filed a merger report to the FTC in accordance with Article 11(1) and (2) of the Fair Trade Law.
2. Based upon the definition of "Internet information providers" given by the competent authority of electronic commerce, the Ministry of Economic Affairs, Yahoo! is a web portal providing comprehensive internet services; while Wretch is simply a community website. What both websites have in common is that both companies' revenues are from their membership fees and from the online advertisements through the service of web communities. Since Wretch is not involved with online shopping and online auction and more than 70% of the users are also Yahoo's members, the merger would not affect the markets of online shopping and online auction much. Moreover, in light of the current website operating mode, website operators mostly provide free services and information to attract users to visit their websites. By gathering large amount of potential consumers, website operators try to make profits from attracting advertisement agencies or advertisers to place advertisements on their websites. Therefore, these websites are of the nature of online media. The FTC felt that the number of visits depended on the quantity of web pages and contents provided by the website operators and determined by the number of potential consumers gathered by the websites, and therefore, a key point to be taken into accounts by the advertisement agencies or advertisers. However, the actual value of the number of visits still requires to be finally realized through trade. The major income of online media is from online advertisements. Users hop easily from one website to another upon the difference of the website services and quality. As a result, the income from online advertisements shall be considered as an important reference when calculating the market share. Since there is no such official statistics of the domestic market sales, the FTC referred to the information published by the Brain magazine and the Internet Advertising and Media Association of Taipei (IAMA). From said information, Yahoo! had 57% to 59.54% market share while Wretch had 1.67% to 1.75% market share.
3. After holding seminars with relevant authorities, scholars and Internet business operators, interviewing downstream advertisement agencies, and asking advice of the competent authority, the FTC found that the merger of Yahoo! and Wretch should not be able to conspicuously change the current market structure. In addition, since that website operation is not restricted by laws, technology and capital and that the Internet technology continues to improve, new Internet media can challenge the existing businesses at any time with diverse and innovated operating modes. Besides, after the global leading search engine, Google, officially participated in the domestic market in January 2007, more diverse Internet media operating modes will be created. Then, telecommunications and digital television businesses could all possibly become potential competitors. As a result, the merger of Yahoo! and Wretch should cause no obvious disadvantage of competition restraints to the relevant market structure and competition. The FTC therefore approved the merger in accordance with Article 12(1) of the Fair Trade Law. However, in order to avoid the applicant from engaging in competition restraints and exploiting its market position through such merger and to assure that the advantage of overall economic benefits would outweigh the disadvantage resulting from the competition restraints, the FTC, in accordance with Article 12(2) of the Fair Trade Law, additionally requested that the merger applicant shall not employ its market position after the merger to improperly obstruct other competitors' website links, email receipt and transmittal, or other services; or restrict trading counterparts to trade or not to trade with specific enterprises; or improperly decide on, maintain or alter prices; or request trading counterparts to exclusively trade with the applicant; or impede other enterprises' fair competition; or other actions exploiting the applicant's comparatively advantageous position in the market.

Appendix:
Yahoo! Taiwan Inc.'s Uniform Invoice Number: 70468838