BASF Taiwan and Taiwan Sheen Soon

BASF Taiwan & Taiwan Sheen Soon

1203rd Commissioners' Meeting (2014)

Case:

BASF Taiwan filed a pre-merger notification regarding its intention to acquire the main business operations and assets of Taiwan Sheen Soon

Key Word(s):

Thermoplastic polyurethane (TPU), polyurethane (PU)

Reference:

Fair Trade Commission Decision of November 26, 2014 (the 1203rd Commissioners’ Meeting)

Industry:

Manufacture of Synthetic Resin and Plastic Materials (1841)

Relevant Law(s):

Articles 6 and Article 11 of the Fair Trade Law

Summary:

BASF Taiwan Ltd. (hereinafter referred to as BASF Taiwan) intended to acquire the thermoplastic polyurethane business operations and assets of Taiwan Sheen Soon Co., Ltd. (hereinafter referred to as Taiwan Sheen Soon). The condition met the merger description specified in Subparagraph 3 of Paragraph 1 of Article 6 of the Fair Trade Law. At the same time, BASF Taiwan accounted for over one quarter of the UV protection agent market and the electronic grade H2O2 market of Taiwan in 2013 while in the preceding fiscal year BASF Taiwan and Taiwan Sheen Soon both exceeded the sales merger-filing threshold announced by the FTC. The intended acquisition was therefore subject to Subparagraphs 2 and 3 of Paragraph 1 of Article 11 of the Fair Trade Law and BASF Taiwan was required to file a merger notification with the FTC.

The merger was a horizontal one. The product market affected would be the polyurethane (PU) market while the geographic market would be the domestic market of Taiwan. Therefore, the considerations were as follows:

(1) The unilateral effect: Since there were other competitors in the domestic PU market, such as Bayer Utechllan and Headway, and the merging parties would increase their market share by only 3.75% after the merger, the effect on the domestic PU market was therefore limited. Furthermore, the merging parties had yet to face competition from other competitors in price, quality, service or other transaction conditions. They would be unable to raise product or service prices unilaterally without being constrained by the competition in the market.

(2) The coordinated effect: There were 523 PU importers and suppliers on the market of Taiwan. The market competition was fierce and the merging parties did not have a high market share percentage. No significant change would occur to the domestic PU market structure after the merger. Hence, the merger would not lessen the current competition in the market and would not lead to any coordinated effect.

(3) Ease of market entry: There were no regulations in Taiwan to restrict entry to the market at issue and neither was there any obstruction to access to raw material sources or tariff barriers. Any trading company could import PU products from overseas and bring competitive pressure on existing businesses. In other words, new competitors could enter the market any time and the merger would not have any influence on the ease of market entry.

(4) Countervailing power: The competition in the domestic PU market was fierce and the trading counterparts of BASF Taiwan and Taiwan Sheen Soon were all multinational businesses with powerful price-negotiating abilities. They could exercise strong countervailing power against the two merging enterprises to prevent them from raising product prices. Viewed from this aspect, the merger was unlikely to weaken the market competition to any significant degree.

(5) After considering the above mentioned, the FTC therefore acted according to Article 12(1) of the Fair Trade Law and decided not to prohibit the merger.

Appendix:

BASF Taiwan Ltd.'s Uniform Invoice Number: 23930512
Taiwan Sheen Soon Co., Ltd.'s Uniform Invoice Number: 16060236

Summarized by Tsai, Tsung-Yung; Supervised by Lin, Gin-Lan

! : For information of translation, click here

(1)	The unilateral effect: Since there were other competitors in the domestic PU market, such as Bayer Utechllan and Headway, and the merging parties would increase their market share by only 3.75% after the merger, the effect on the domestic PU market was therefore limited. Furthermore, the merging parties had yet to face competition from other competitors in price, quality, service or other transaction conditions. They would be unable to raise product or service prices unilaterally without being constrained by the competition in the market.
(2)	The coordinated effect: There were 523 PU importers and suppliers on the market of Taiwan. The market competition was fierce and the merging parties did not have a high market share percentage. No significant change would occur to the domestic PU market structure after the merger. Hence, the merger would not lessen the current competition in the market and would not lead to any coordinated effect.
(3)	Ease of market entry: There were no regulations in Taiwan to restrict entry to the market at issue and neither was there any obstruction to access to raw material sources or tariff barriers. Any trading company could import PU products from overseas and bring competitive pressure on existing businesses. In other words, new competitors could enter the market any time and the merger would not have any influence on the ease of market entry.
(4)	Countervailing power: The competition in the domestic PU market was fierce and the trading counterparts of BASF Taiwan and Taiwan Sheen Soon were all multinational businesses with powerful price-negotiating abilities. They could exercise strong countervailing power against the two merging enterprises to prevent them from raising product prices. Viewed from this aspect, the merger was unlikely to weaken the market competition to any significant degree.
(5)	After considering the above mentioned, the FTC therefore acted according to Article 12(1) of the Fair Trade Law and decided not to prohibit the merger.