Taiwan Depository, Clearing Corporation and Taiwan Integrated Shareholder Service Company

Case:

TDCC filed a pre-merger notification regarding its intention to merge with TISSC

Key Word(s):

Horizontal merger, shareholder electronic voting service, overall economic benefit

Reference:

Fair Trade Commission Decision of December 25, 2013 (the 1055th Commissioners' Meeting)

Industry:

Other Securities (6619); Data Processing, Hosting and Related Services (6312)

Relevant Law(s):

Articles 6, 11 and 12 of the Fair Trade Law

Summary:

1. Taiwan Depository & Clearing Corporation (hereinafter referred to as TDCC) intended to merge with Taiwan Integrated Shareholder Service Company (hereinafter referred to as TISSC), after which TDCC will become the surviving company. The condition met the description set forth in Article 6(1)(i) of the Fair Trade Law. Moreover, the post-merger capacity of both companies would meet the merger filing threshold specified in Subparagraphs 1 and 2 of Article 11(1) of the Fair Trade Law while the exemption provisions prescribed in Article 11-1 of the same law were inapplicable. Therefore, TDCC and TISSC filed a pre-merger notification to the FTC.

2. Competition restriction analysis: Since both merging parties, TDCC and TISSC, provided shareholder electronic voting platform service, the merger would be a horizontal one. After the merge, TDCC would become the only firm providing the above service in the relevant market. However, as TDCC's service charge standards would still require the approval of the Financial Supervisory Commission (hereinafter referred to as FSC) as stipulated in the Regulations Governing Centralized Securities Depository Enterprises, TDCC would not be able to obtain any power to raise its service charges or limit its output through the merger.
3. Overall economic benefit assessment:

   (1)	The industry (shareholder electronic voting platform service) involved in this case had the characteristics of economies of scale and the market was limited since market demand depended on the applicable range of electronic voting defined by the FSC. In countries with mature capital market, there would be usually only one electronic voting platform operation. Under such circumstances, the FTC believed that it would be economically efficient to have only one business to provide the service in the market.
   (2)	As the electronic voting platform operated by TISCC had not yet passed information system certification as required by the law, the company would have had to withdraw from the shareholder electronic voting platform service market whether it merged with TDCC or not. In other words, the merger would not increase additional negative effects on market competition.
   (3)	The merger could provide public companies and investors with safer and more convenient electronic voting platform service and this would have a positive effect on industrial development.
   (4)	The FSC, the regulatory authority in charge of the oversight of the financial industry, believed the merger would facilitate achieving goals of financial supervision policy and the existed proper price supervision mechanisms in order to prevent excessive pricing and anti-competition practices.

4. Based on the abovementioned considerations, the FTC concluded that the overall economic benefit of the merger between TDCC and TISSC would be greater than disadvantages brought by the competition restrictions thereof incurred. Therefore, the FTC acted according to Article 12 (1) of the Fair Trade Law and did not prohibit the merger.

Appendix:
Taiwan Depository & Clearing Corporation's Uniform Invoice Number: 23474232
Taiwan Integrated Shareholder Service Company's Uniform Invoice Number: 27545547

Summarized by Tsai, Jing-Hui; Supervised by Liao, Hsien-Chou