Dafu Media Co., Ltd., Shengting Co., Ltd., & Kbro's cable TV systems

Case:

Key Words:

cable TV

Reference:

Fair Trade Commission Decision of October 29, 2010 (the 23rd Ad Hoc Commission Meeting), Merger Letter Kung Jie Tzu No.099004

Industry:

Cable and Other Subscription Programming (6022)

Relevant Laws:

Article 6, 11 and 12 of the Fair Trade Law

Summary:

1. Dafu (transliteration) Media Co., Ltd. (hereinafter referred to as Dafu Media) intended to purchase the 80% shares of Shengting (transliteration) Co., Ltd. held by PX Capital Partners B.V. to take control of Shengting's management and personnel appointment or removal. It complied with the types of merger described in Subparagraphs 2 and 5of Article 6 (1) of the Fair Trade Law (FTL). As the 12 cable TV systems operators participating in the merger accounted for over a quarter of the market shares of their operating areas, thus the intended merger reached the filing threshold prescribed in Subparagraph 2, Article 11 (1) of the FTL. Without being subject to the exception circumstances described in Article 11-1 of the same law. Dafu Media therefore filed the pre-merger notification to the FTC as required by law.
2. From the structural aspect, the number of subscribers of the cable TV systems controlled by the merging parties did not exceed one third of the total number of those in the country and the number of program channels they provided also did not surpass one quarter of the number of all the channels available. Hence, the FTC considered that there would be no significant disadvantage resulted from competition restraint. On the contrary, the merger could boost the overall economic benefit through promotion of digital development in cable TV services, improvement of the visual media industry, expedition of digital convergence, and provision of more options to consumers.
3. Taking into consideration the framework of existing regulations and control, market structure and competition, opinions from various sectors, future technological development tendencies, and maintenance of competition on the post-digital convergence market, the FTC deemed the overall economic benefit as greater than disadvantages resulted from competition restraint. However, to prevent likely drawbacks resulted from competition restraint as a result of the merger and ensure the overall economic benefit, the FTC attached the following 13 conditions to the non-prohibition decision in accordance with Article 12 (2) of the FTL:
4. (1) Without the consent of the FTC, the merged enterprises, their subsidiaries and companies they control may not directly or indirectly obtain the shares of any other cable TV services or their subsidiaries or companies under their control.
   (2) Without the consent of the FTC, the board directors, supervisors or managers of the merged enterprises, their subsidiaries and companies they control may not assume the position of board director, supervisor or manager of any other cable TV services or their subsidiaries or companies under their control.
   (3) Without the consent of the FTC, the merged enterprises, their subsidiaries and companies they control may not sell any of their shares to Taiwan Mobile Co., Ltd. or any of its subsidiaries or companies it controls (including but not limited to TFN Media Co., Ltd. and cable TV systems under its control; the same applies in the following conditions,) or directly or indirectly hold or obtain the shares of Taiwan Mobile Co., Ltd. or any of its subsidiaries or companies it controls.
   (4) Without the consent of the FTC, the board directors, supervisors or managers of the merged enterprises, their subsidiaries and companies they control may not assume the position of board director, supervisor or manager of Taiwan Mobile Co., Ltd. or any of its subsidiaries or companies it controls or appoint any board director, supervisor or manager of Taiwan Mobile Co., Ltd. or any of its subsidiaries or companies it controls to be the board director, supervisor or manager of any of the merged enterprises or their subsidiaries or companies under their control.
   (5) Without the consent of the FTC, the cable TV systems run by the merged enterprises, their subsidiaries or companies they control may not share any headend network, trademark and customer service or participate in co-management or delegated management with any other cable TV services.
   (6) Without the consent of the FTC, the merged enterprises, their subsidiaries and companies they control may not add any analog satellite TV programs they produce or act as agents for the existing analog satellite TV programs.
   (7) The merged enterprises, their subsidiaries and companies they control may not establish any contract or agreement of any form with other cable TV services, their subsidiaries or companies under their control to make consolidated purchases from cable TV program suppliers, make joint pricing or boycott, or undertake any conduct described in the Fair Trade Law as concerted actions.
   (8) The merged enterprises, their subsidiaries and companies they control may not participate in joint program sales with any other cable TV program suppliers or undertake any conduct described in the Fair Trade Law as concerted actions.
   (9) Without justifiable causes, the merged enterprises, their subsidiaries and companies they control may not refuse to license the satellite TV programs they produce or act as agents for other cable TV services, satellite TV services, multimedia content services or any other competitors, whether they broadcast through cable or wireless transmission, or undertake any discriminative treatment.
   (10) Without justifiable causes, the merged enterprises, their subsidiaries and companies they control may not lincense satellite TV programs they produce or act as agents for other cable TV services, satellite TV services, multimedia content transmission services or any other competitors, whether they broadcast through cable or wireless transmission, at different prices or on different conditions.
   (11) The merged enterprises, their subsidiaries and companies they control shall begin on the day after receiving this merger decision to do the following to safeguard the overall economic benefit:

   (i) Complete cable TV digitalization and two-way cable TV system network construction to increase program options for consumers.
   (ii)Achieve the digital cable TV prevalence target stated in the Digital Convergence Development Project approved by the Executive Yuan on July 8, 2010 for expedition of digital convergence.
   (iii) Acquire licensing from satellite TV program suppliers for playing programs through Internet Protocol Television (IPTV) and in turn license network TV operators at fair and reasonable prices to promote fair competition between visual information platforms.
   (iv) Develop high-density digital contents and channels in the country to help promote creative and cultural industries.

(12) Within five years starting from the day after receiving this merger decision, Dafu Media is required to present to the FTC for record before July 1 each year the following documents:

(i) The names of and agency contracts for the satellite TV programs the merged enterprises, their subsidiaries and companies they control produce or act as agent for.
(ii)All transaction data in relation to the satellite TV programs the merged enterprises, their subsidiaries or companies they control produce or act as agent for, including price quotations, licensing fees, discounts and buyers.
(iii) A report on the achievements in improvement of the overall economic benefit (including but not limited to all those listed under Point 11."

(13) Within five years starting from the day after receiving this merger decision, Dafu Media is required to present to the FTC for record all the chairperson, board director, supervisor, manager and company charter changes in the merged enterprise, their subsidiaries and companies they control.

Appendix:
Dafu Media Co., Ltd.'s Uniform Invoice Number: 25147558
Shengting Co., Ltd.'s Uniform Invoice Number: 28010900
Kbro Co., Ltd.'s Uniform Invoice Number: 80173221

Summarized by: Lin, Shu-Ling; Supervised by: Liou, Chi-Jung