Financial Information Service & 2 other companies

Case:

Key Word(s):

TSM platform, conglomerate merger, financial institution

Reference:

Fair Trade Commission Decision of July 2, 2014 (the 1182nd Commissioners' Meeting); Disposition Kung Jie Tzu No. 103003

Industry:

Other Activities Auxiliary to Financial Service Activities (6639)

Relevant Law(s):

Articles 6,11 and 12 of the Fair Trade Law

Summary:

1. Financial Information Service Co., Ltd., National Credit Card Center of R.O.C. and the Taiwan Payments Clearing System Development Foundation intended to set up a joint venture named Taiwan Mobile Payment Co. (hereinafter referred to as the new enterprise) to operate a payment service provider trusted service manager ("PSP TSM"). The above plan met the merger description of "an enterprise operates jointly with another enterprise on a regular basis" set forth in Article 6(1)(iv) of the Fair Trade Law as each of the merging parties also accounted for one quarter of the share of the relevant market. Therefore, the said businesses filed a merger notification with the FTC.
2. Analysis of potential competition restrictions and effects on the overall economy:
   

   (1)

   The focus of analysis of the effects of potential competition restrictions in this case: The new enterprise intended to provide PSP TSM services. There would be no overlaps with the interbank payment settlement (clearing) operations, credit card transaction processing and check clearing, and settlement services of the merging enterprises. Therefore, it was a conglomerate merger. In addition, none of the merging parties had planned for cross-industry development to operate a trusted service manager (hereinafter referred to as "TSM") on its own. Consequently, significantly potential competition among the merging enterprises would be unlikely because the merger would not lessen potential competition among the merging enterprises. Furthermore, the new enterprise would provide PSP TSM services trough a membership system to banks, credit card issuers, and other financial institutions. Since the merging enterprises had had close business relations with financial institutions over the years and the new enterprise intended to offer stock options to financial institutions, if the new enterprise restricted its members from using the services of other TSM platforms, it could make other TSM platforms unable to attract enough service providers (especially financial institutions) to join them. In turn, this would cause foreclosure or exclusion to other TSM platforms and weaken competition in the market. Meanwhile, as the merging parties all accounted for a significant percentage of the share of the relevant market, if they used their market power to force their trading counterparts to join the PSP TSM operated by the new enterprise or use its services so that the new enterprise can increase its market share, it could cause foreclosure or exclusion to other TSM platforms and weaken competition in the market.

   (2)

   Overall economic benefit assessment: Once the new enterprise was set up, the number of TSM platform operators in the market would increase from 3 to 4. The new enterprise would start to compete with existing operators in terms of content, quality and price of service. It could help check and balance the powers of other operators and prevent any specific competitor from monopolizing the market, thus increasing the benefits for consumers.

3. After evaluating the abovementioned factors, the FTC acted according to Article 12(2) of the Fair Trade Law and approved the merger with the following conditions attached to ensure that the overall economic benefit would outweigh potential disadvantages resulting from the competition restrictions thereof incurred:
   

   (1)	The new enterprise may not restrict service providers from joining other TSM platforms or using their services.
   (2)	The enterprises in the merger may not force their trading counterparts to join the TSM platform operated by the new enterprise or use its services.
   (3)	Before starting its operation, the new enterprise is required to present to the FTC the templates of the contract to be entered into between the new enterprise and the service providers, as well as provide the FTC with related documents of the said contracts. The new enterprise is also required to provide the FTC with the following information by the end of March each year for five years: the list of shareholders, the sales in the preceding year, the number and names of collaborating service providers, and new business items not registered in the original declaration statement.

Appendix:

Financial Information Service Co., Ltd.'s Uniform Invoice Number: 16744111
National Credit Card Center of R.O.C.'s Uniform Invoice Number: 01508949
Taiwan Payments Clearing System Development Foundation's Uniform Invoice Number: 15578682
Taiwan Mobile Payment Co.'s Uniform Invoice Number: 54390700

Summarized by Yang, Chung-Lin; Supervised by Liao, Hsien-Chou