Oracle Taiwan LLC and Sun Microsystems, Inc.

Case:

Key Words:

extraterritorial merger, database management, system, restrictive competition, market share, market concentration, cross-industry operation

Reference:

Fair Trade Commission Decision of September 2, 2009 (the 930th Commissioners' Meeting)

Industry:

Software Design Services (6201)

Relevant Laws:

Article 6, 11 and 12 of the Fair Trade Law

Summary:

1. Oracle Taiwan LLC (hereinafter referred to as Oracle) intended to conduct an extraterritorial merger via its newly-established subsidiary, Soda Acquisition Corporation, with Microsystems, Inc. (hereinafter referred to as Microsystems) as the surviving company. Oracle at the mean time would purchase Microsystems' stock in cash and become the sole stockholder of Microsystems. The act of Oracle to merge with Microsystems through its newly-established subsidiary and its holding of 100% of Microsystems' stock fell under the definitions of the “merger with another enterprise” and "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" as provided in Article 6(1)(i) and (ii) of the Fair Trade Law. In addition, Oracle possessed more than one-fourth of the market share in the database management system market of Taiwan and reached the threshold for the filing of the pre-merger notification set forth in Article 11(1)(ii) of the Fair Trade Law without being subject to the exceptional circumstances set forth in Article 11-1. Oracle and Microsystems therefore filed a pre-merger notification in accordance with the law.

2. Restrictive competition evaluation of this merger case:
   (1)Horizontal Merger: Oracle mainly engages in software design, research and development, manufacture, distribution, and related services. Microsystems on the other hand mainly engages in hardware sales providing software that is free or of minimum charges. The overlapping products upon the merger of Oracle and Microsystems are the database management system, middleware, and software developing tools. It was found that the merger of these two enterprises would bring no obvious changes to the market share and market concentration in the software-related markets of Taiwan. The new company would still be subject to the market competition and have no ability to raise product prices or service remunerations. Due to the facts that the changes to the market structure are quite limited after the merger and that there are numerous software products in the open and competitive markets of Taiwan, the merger would cause no harm to the market competitions and would not weaken the trading partners' ability to select the products or services of another company at all, nor their bargaining power when purchasing such products or services.
   (2)Conglomerate Merger: Currently there are no domestic laws or regulations governing the restrictions or entry barriers with regard to software, hardware, and information technology services industries. The merger of Oracle and Microsystems would not have any impact on the competition in these markets. Relevant technology advancements would not make it difficult for other enterprises to engage in cross-industry operations of relevant products and services. With Oracle being engaged in software design, research and development, manufacture, distribution, and related services, and Microsystems in hardware sales, the merger of these two enterprises would allow Oracle to have a complete development plan of cross-industry operations. Moreover, there are numerous businesses in the domestic software, hardware, and information technology services markets. The merger should not have any substantive impairment on the competition in these markets.

3. In conclusion, this merger should be able to bring overall economic benefits that would outweigh the disadvantages resulting from the competition restraints. Therefore, in accordance with Article 12(1) of the Fair Trade Law, the FTC did not prohibit this merger.
   

Summarized by Lai, Mei-Hua; supervised by Chen,Yuhn-Shan