Epistar Corporation, Japanese Toyota Gosei Co., Ltd. & Twin Hill Group

Case:

Key Words:

LED epitaxial chip and crystal, LED packaging

Reference:

Fair Trade Commission Decision of November 10, 2010 (the 992nd Commission Meeting)

Industry:

Other Optoelectronic Materials and Components Manufacturing (2649)

Relevant Laws:

Article 6, 11 and 12 of the Fair Trade Law

Summary:

1. Epistar Corporation (hereinafter referred to as Epistar), Japanese Toyota Gosei Co., Ltd. (hereinafter referred to as Toyota Gosei), and Twin Hill Group (hereinafter referred to as Twin Hill) intended to set up a joint venture. As each of the three enterprises would subscribe to a certain number of shares of the new company, the condition complied with the merger types described in Subparagraphs 2, 4 and 5 of Article 6 (1) of the Fair Trade Law (FTL). Furthermore, since the revenues of the three enterprises in the previous fiscal year all exceeded the threshold for sales monetary amount for non-financial institutions the FTC had announced and met the threshold for pre-merger notification filing as stipulated in Subparagraph 3 of Article 11 (1) of the FTL. Without the exceptional circumstances described in Article 11-1 of the same law, the said enterprises therefore filed the pre-merger notification to the FTC as required by the Law.
2. Market definition:
   (1)The product market: The LED market is divided into chip manufacturing in the upstream, crystal manufacturing in the midstream, and packaging in the downstream. Epistar manufactures and sells LED chips and crystals while Toyota Gosei produces and sells LED crystals and packaged products. Twin Hill markets Toyota Gosei's LED crystals and packaged products in Chinese-Taipei as an agent. As most of the upstream and midstream LED businesses involve these two products and the intended joint venture would be selling LED crystal products only, the case was therefore defined as the LED crystal (including chip) market.
   (2)The geographic market: The parties involved in the merger were all domestic businesses and the intended joint venture would also operate in the same region. For assessment of the impact of the joint venture on the domestic market, the geographic market was defined as "within the territory of Chinese-Taipei."
3. Post-merger competition analysis:
   (1)The merging enterprises had always had business relations. The chief function of the joint venture was to simplify the procedure of exportation to Japan. The market share increase after the merger would be limited whereas more sales channels would be created and the competitiveness of domestic LED crystal products would be enhanced. Moreover, since the applications and sales targets of the LED crystal products made by Epistar and Toyota Gosei were dissimilar, both enterprises would carry on their manufacturing and sales of crystal products in the same region. Meanwhile, the numbers of competitors in this industry in and out of the region would still be large, and the markets for applications of the crystals produced would remain different. Both companies would continue their performance competition with the quality and special features of their products and concerned trading counterparts would still have their options and room for bargaining.
   (2)Although a major player with patent products in the global LED market, Toyota Gosei's local market share was still small. Moreover, the domestic LED manufacturers were significantly large in scale and had their low price advantage whereas domestic and foreign competitors were large in number. Concerned trading counterparts would still have the capacity to keep the merging enterprises from increasing their product prices or service charges. Lastly, the joint venture would give the merging enterprises more flexibility in delivery of LED crystal products, reducing transaction costs, as well as acquiring licensing for certain patents and extending patent protection globally. The effect on the domestic LED industry would be positive and uplifting.
   (3) Based on the above reasoning, the FTC deemed that the merger would not create disadvantages resulted from competition restraint and the overall economic benefits would be greater than the disadvantages resulted from competition restraint. The FTC therefore decided not to prohibit the merger in accordance with Article 12 (1) of the FTL.

Appendix:
Epistar Corporation's Uniform Invoice Number: 84149786
Twin Hill Group's Uniform Invoice Number: 97432742

Summarized by:Liao,Wan-Ting;Supervised by:Wu,Lieh-Ling