Vie Show Cinemax Co., Ltd. & Wang Pai Jih Hsin Cinema Co. Ltd.

Case:

Key Words:

Vie Show Cinemax, Wang Pai Jih Hsin Cinema, merger.

Reference:

Fair Trade Commission Decision of September 27, 2007 (the 829th Commissioners' Meeting)

Industry:

Motion Picture and Video Projection (8530))

Relevant Laws:

Article 6(1) ,11(1) and 12(1) of the Fair Trade Law

Summary:

1. This case was originated from the facts that Vie Show Cinemax Co., Ltd. planned to contribute capital to acquire 50% shareholding of Wang Pai Jih Hsin Cinema Co. Ltd. which operated Showtime Cinemas in Jih Hsin flagship store. Under the commission of Wang Pai Jih Hsin Cinema Co. Ltd., Vie Show Cinemax Co., Ltd. was to operate Showtime Cinemas in Jih Hsin flagship store. Vie Show Cinemax Co., Ltd. and Wang Pai Jih Hsin Cinema Co. Ltd. were all in the motion picture distribution industry, and the merger which they formed fell in the class of the horizontal merger, which fell under the merger type set forth in Articles 6(1)(ii), (iv) and (v) of the Fair Trade Law which respectively provide that "where an enterprise holds or acquires the shares or capital contributions of another enterprise to an extent of more than one-third of the total voting shares or total capital of such other enterprise," "an enterprise … is entrusted by another enterprise to operate the latter's business" and "an enterprise directly or indirectly controls the business operation or the appointment or discharge of personnel of another enterprise." In addition, the market share of Vie Show Cinemax Co., Ltd. in 2006 was 26.79% and it had already reached the threshold for the filing of the merger report set forth in Article 11(1)(ii) of the Fair Trade Law. Vie Show Cinemax Co., Ltd. and Wang Pai Jih Hsin Cinema Co. Ltd. did not fall within the exceptional circumstances set forth in Article 11(1). Therefore, the parties shall file a merger report to the FTC by issuing a letter with annexes prior to the merger.
2. Findings of FTC after investigation: There were approximately 20 cinemas in Taipei City, not including second-run cinemas, and the competition among them was vigorous. After the merger of Vie Show Cinemax Co., Ltd. and Wang Pai Jih Hsin Cinema Co. Ltd., the enterprises of the merger would still have no capability of raising the prices alone, and the merger would also not result that each cinema jointly monopolized the prices of entrance tickets. In addition, engaging in the domestic motion picture distribution business did not require large capital and a high level of technicality, and it would be unlikely that the said merger would advance the entry barrier of potential competitors, as there was a growing trend for the demand of leisure and entertainment in the modern life style. There was still a room for development of the motion picture distribution market so that there were opportunities for the new comers to compete with the existing enterprises. Besides, if Vie Show Cinemax Co., Ltd. and Wang Pai Jih Hsin Cinema Co. Ltd., after their merger, raised the prices of entrance tickets on their initiative, consumers might immediately turn to purchase tickets from other cinemas or give up going to the cinemas and see DVD movies or movies on TV instead. In addition, the merger of Vie Show Cinemax Co., Ltd and Wang Pai Jih Hsin Cinema Co. Ltd. would not weaken the ability of trading counterparts or potential trading counterparts to counterbalance. Therefore, the overall economic benefits brought by the merger in this case would outweigh the disadvantage resulting from the competition restraints. Therefore, in accordance with Article 12(1) of the Fair Trade Law, the FTC does not prohibit the merger of Vie Show Cinemax Co., Ltd. and Wang Pai Jih Hsin Cinema Co. Ltd.

Appendix:
Vie Show Cinemax Co., Ltd.'s Uniform Invoice Number: 16086448
Wang Pai Jih Hsin Cinema Co. Ltd.'s Uniform Invoice Number: 80694073

Summarized by Mai, Huei-li; supervised by Lu, Li-na