Want-China Broadband Co., Ltd, An-Shun Development Co., Ltd, Bo-Kang Development Co., Ltd., and Its Affiliates

Case:

Key Words:

cable TV, broadband

Reference:

Fair Trade Commission Decision of April 27, 2011 (the 1016th Commissioners' Meeting), Merger Letter Kung Jie Tzu No. 100003

Industry:

Cable and Other Subscription Programming (6022)

Relevant Laws:

Subparagraphs 2 and 5 of Article 6(1) and Subparagraph 2 of Article 11(1) of the Fair Trade Law

Summary:

1. Want-China Broadband Co., Ltd. (hereinafter referred to as WWCB) intended to purchase from Malaysian Evergreen Jade SDN BHD and Goodwill Tower SDN BHD their holdings of shares of An-Shun (transliteration) Development CO., Ltd. (hereinafter referred to as An-Shun Co.) and Bo-Kang Development Co., Ltd. (hereinafter referred to as Bo-Kang Co.) Once the transactions were completed, WWCB would possess 100% of the shares of both An-Shun Co. and Bo-Kang Co. and gain control of the finances, operations, and personnel appointment and dismissal of both companies and their affiliates [including China Network Systems, Global Digital Media Co., Ltd., Jilong and 8 other cable TV systems. Hence, In line with Subparagraphs 2 and 5 of Article 6 (1), and Subparagraph 2 of Article 11 (1) of the Fair Trade Law (FTL), WWCB filed a pre-merger notification with the FTC.
2. Findings of the FTC after investigation:
   1. The case involved horizontal, vertical, and conglomerate merging and the product market included the “cable TV service market,” “satellite TV program supply market,” and “markets of online shopping and mail order without physical retail outlets.” In terms of structure, the cable TV operators involved in the said merger did not control over one third of the total cable TV subscribers on the market and the number of channels they provided was also less than one quarter of the total number of channels available to cable TV operators. Therefore, the merger will not bring any significant disadvantages resulting from the restriction on market competition.
   2. The merger could bring overall economic benefits such as expedition of cable TV digitalization, stimulation to visual media industries, promotion of digital convergence and competition, and increase of choices for consumers.
   3. There existed certain concerns about restriction on market competition on the cable TV service market, satellite TV program supply market, and markets of online shopping and mail order without physical retail outlets after the merger. The major concerns rise from the fact that special municipality or county/city would be the minimum operation area when the Cable Radio and Television Act was amended and it would be unlikely to rule out the possibility that such mergers would lead to conduct similar to coordinated effect or business parallel. Meanwhile, if the merged enterprises abused their dominant market status resulted from the vertical merging in the cable TV service market and satellite TV program supply market and engaged in unjustifiable refusal to transaction, differential treatment or joint boycott with enterprises outside the merger, it would affect the trading order of the cable TV service market and satellite TV program supply market. If WWCB, its affiliates or companies under its control, in pursuing their own interests, exploited the leverage effect from their holdings and refuse to transact with other TV shopping channel operators who wanted to rent designated commercial channels run by cable TV operators that had participated in the merger, treated them differentially, or even boycotted them jointly, the said other TV shopping operators could be forced out of the market due to decrease of their main business revenues as a consequence of competition restriction.
   4. The dominance of the merged enterprises on the cable TV service market, satellite program supply market, and markets of online shopping and mail order without physical retail outlets could be reduced because of future progress in communications technology, cable TV digitalization, competition from the multimedia content delivery service from fixed telecommunications operators, convergence of the 4C industry and service markets resulted from digital convergence, and related regulations. Consequently, the concerns about the abuse of market power by the said enterprises or market foreclosure as the result of the merger would be mitigated. However, the FTC still deemed it necessary to attach conditions with regard to structural and behavioral control to eliminate the disadvantages likely arising from the restriction on market competition in order to protect the overall economic benefits. Hence, the FTC attached certain conditions but did not prohibit the merger.
3. Grounds for disposition:
   The overall economic benefits from the merger would be greater than the disadvantages from market competition restriction and there was no need to prohibit the merger in accordance with Article 12 (1) of the FTL. However, to eliminate potential competition restriction and ensure the overall economic benefits would be greater than the disadvantages resulting from market competition restriction, the FTC therefore acted in line with Article 12 (2) of the FTL and attached 11 conditions but did not prohibit the merger.

Appendix:
Want- China Broadband Co. Ltd.'s Uniform Invoice Number: 53095005
An-Shun Development Co., Ltd.'s Uniform Invoice Number: 28445320
Bo-Kang Development Co., Ltd.'s Uniform Invoice Number: 28443532