CitiBank & Overseas Chinese Bank

Case:

Key Words:

banks, merger, merger report, market share

Reference:

Fair Trade Commission Decision of May 24, 2007 (the 811th Commissioners' Meeting)

Industry:

Banks (6412)

Relevant Laws:

Article 11 of the Fair Trade Law

Summary:

1. This case being originated from the facts that through the channel of the shareholding subsidiary (Citibank Overseas Investment Corp., hereinafter called “COIC”), CitiBank planned to establish a subsidiary (it was temporarily named as Citi Group Global Commercial Bank [hereinafter called “Citi Global Bank”]) in domestic banking market; then Citi Global Bank and Overseas Chinese Bank merged into one. After the reorganization was done, and Citi Global Bank remained unchanged and all operations of Overseas Chinese Bank were terminated; the merger fell under the type set forth in Article 6(1)(i) of the Fair Trade Law. Additionally, the sales for the preceding fiscal year of Overseas Chinese Bank and the enterprises in the domestic market, which had a subordinate relationship with CitiBank, respectively, exceeded the threshold amount publicly announced by the Central Competent Authority as stipulated by Article 11(1)(iii) of the same law, and they did not fall within the circumstances set forth in Article 11(1). Therefore, the parties filed a merger report to the FTC.

2. The FTC pointed out that the main concern of the merger case is its impacts on domestic banking market competition. However, in term of the information promulgated by the Financial Supervisory Commission, Executive Yuan, there are numerous banks in the domestic market such that the market share of each enterprise is low, the industry is extremely competitive, and hence the market can be considered lowly-concentrated. After examining the merger of the enterprises, the FTC found that the market share of the enterprises of the merger does not change much and it will still fall under restraint of market competition; and it has no ability to raise prices of products or service remuneration. In the same way, there is a quite limited alteration of the market structure and the merger does not harm the competition amongst existing enterprises, the new competitor can compete immediately in the market after conforming to relevant laws and regulations. If the trading counterpart is a large-scale group company, the trading counterpart has quite a counterbalance power against the raise of prices of products or service remuneration of the enterprises of the merger. In other words, the merger of the Citi Global Bank and the Overseas Chinese Bank has not significantly harmed the competition of the relevant market and it is beneficial to the overall economy as a whole. Therefore, Article 12(1) of the Fair Trade Law does not prohibit such a merger.

    

   Summarized by Tsao, Hui-Wen; Supervised by Chen, Yuhn-Shan