Yuanta Financial Holding Co., Ltd. & Team Pro Securities Co., Ltd.

Case:

Key Words:

market share, securities

Reference:

Fair Trade Commission Decision of October 3, 2012 (the 1091st Commissioners' Meeting)

Industry:

Securities Brokerage (6611)

Relevant Laws:

Article 6 and 12 of the Fair Trade Law

Summary:

1. Yuanta Securities Co., Ltd. (hereinafter referred to as Yuanta Securities), a wholly-owned subsidiary of Yuanta Financial Holding Co., Ltd. (hereinafter referred to as Yuanta Financial Holdings), intended to accept the transfer of the entire business and property of Team Pro Securities Co., Ltd. (hereinafter referred to as Team Pro Securities) and the transaction fell into the category of the merger description set forth in Subparagraph 3, Paragraph 1, Article 6 of the Fair Trade Law. Yuanta Securities accounted for 19.1% of the credit transaction and margin trading and securities lending market, while Yuanta Securities Finance Co., Ltd. (hereinafter referred to as Yuanta Securities Finance), another wholly-owned subsidiary of Yuanta Financial Holdings, also had a 6.56% market share. The two companies took up 25.66% of the market. Meanwhile, Yuanta Securities also accounted for 25.55% of the warrant market. Both figures reached the threshold set forth in Subparagraph 2, Paragraph 1, Article 11 of the Fair Trade Law, "one of the enterprises in the merger has one fourth of the market share, while Article 11-1 of the same law did not apply." Hence, a merger notification was filed with the FTC.
2. Findings of the FTC after investigation:
   According to the securities firm information from the Securities and Futures Bureau (hereinafter referred to as the SFB) of the Financial Supervisory Commission and from Taiwan Stock Exchange Corporation (hereinafter referred to as TWSE), Yuanta Securities engaged in securities brokerage, dealing and underwriting, and credit transaction such as margin trading and securities lending business, whereas Team Pro Securities only conducted securities brokerage. The business operations of the two companies overlapped only in the area of securities brokerage while the structure and concentration rate in the dealing, underwriting, credit transaction such as margin trading and securities lending, and warrant markets would not be affected by the merger. Therefore, the focus of the analysis on this merger was the securities brokerage market. According to statistics from the SFB, as of the end of Aug. 2012, there were 85 securities brokers in the country. At the same time, the market share data calculated by Gre Tai Securities Market based on the trading value in 2011 showed that Yuanta Securities accounted for 14.69% of the brokerage market and Team Pro Securities 0.27%, 14.96% in total. Meanwhile, the Four-firm Concentration Rate (CR4) was 32.78% and would be 33.05% after the merger, and there were only three firms with a market share over 5%.
   
3. Grounds for non-prohibition:
   This was a horizontal merger case. Yuanta Securities operated nationwide and had 188 offices in the country. Team Pro Securities only operated in Taipei City where it had two offices. There was a large business scale difference between the two companies. The competitors of Yuanta Securities were other large securities firms with a considerable business scale and Team Pro Securities was not one of them. Hence, the merger could not lead to any significant unilateral effect. After the merger, there would still be 84 securities firms in the country and the market concentration rate would remain basically unchanged. In addition, the business scale of securities firms varied to a great extent and it was difficult to conclude there would be any coordinated effect. Finally, the factors of barriers to entry and countervailing power were also examined and the conclusion was that the merger did not seem able to lead to any substantial impairment. Therefore, the FTC decided not to prohibit the merger according to Article 12 (1) of the Fair Trade Law.

Appendix:
Yuanta Financial Holding Co., Ltd's Uniform Invoice Number: 70796749

Summarized by: Lai, Hsin-Yi; Supervised by: Liao, Hsien-Chou