Acer Inc. & Gateway, Inc.

Case:

Key Words:

competition restraint, economic benefits, personal computer

Reference:

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

Industry:

Computer Integration Systems Services (6202)

Relevant Laws:

Article 6 ,11 and 12 of the Fair Trade Law

Summary:

1. In order to introduce the multi-brand marketing strategy and fulfill the purpose of consolidating its market position in the United States, Acer Inc. wanted to obtain the brand of Gateway, Inc. Through this merger, it planned to acquire 100% shareholding of Gateway, Inc. It filed a merger report to the FTC in accordance with the Fair Trade Law.
2. After the Commission conducted an investigation on this case, it found that the merger of this case fell under the merger type set forth in Article 6(1)(ii) of the Fair Trade Law, which provides 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." In addition, the market share of Acer Inc. in the domestic laptop market in 2006 had reached 26.1% – Acer Inc. had already reached the threshold for the filing of the merger report set forth in Article 11(1)(ii) of the Fair Trade Law. Therefore, such a merger shall be reported to the Commission. The FTC accepted handling Acer Inc.'s application for merger in accordance with Article 7(1)(ii) of the Enforcement Rules to the Fair Trade Law.
3. Although the market shares of the enterprises participating in the merger in the domestic desktop and laptop sales markets had reached 18.4% and 26.1% respectively, the enterprises still had to face the vigorous competition with many international brand companies (for example, HP, DELL, SONY, APPLE, LENOVO, Toshiba and so on). Additionally, they faced low price competition from CLONE (and self-assembled) enterprises and the new threats derived from the computer components enterprises' businesses of the barebone systems; therefore, it would still be difficult for the enterprise participating in the merger to be capable of raising the price of a product or service remuneration alone, and the merger would not cause obvious harm on the level of competition in the market as a whole. In the same way, Gateway, Inc. had not sold desktop computers and laptops in the domestic markets since 2001; after the merger, its market structure would not change. Furthermore, as it face the vigorous competition with many international brand companies and new competitors have no obvious entry barriers, the ability of trading counterparts or potential trading counterparts to counterbalance the enterprises of the merger against the raise of prices of products or service remunerations remain strong. The merger would not cause adverse effects on the up- and down-stream trading counterparts. After the merger in this case, the overall economic benefits would outweigh the disadvantage resulting from the competition restraints. Therefore, in accordance with Article 12 of the Fair Trade Law, the FTC does not prohibit the merger of Acer Inc. and Gateway, Inc.

Appendix:
Acer Inc.'s Uniform Invoice Number: 20828393
Gateway, Inc.'s Uniform Invoice Number: Not Applicable

Summarized by Chen, Haw-kae; supervised by Liou, Chi-jung