Hydrogen, acetylene

1. BOC LienHwa Industrial Gasses Co., Ltd. (hereinafter referred to as BOC LienHwa) intended to acquire 12 million shares of Tung Bao Corporation (hereinafter referred to as Tung Bao Corp.) in order to improve the hydrogen production techniques of Tung Bao Corp. After the merger, BOC LienHwa would be in possession of 50.7% of the total shares of Tung Bao Corp. and gain direct control of its management or the power of personnel appointment and dismissal. The condition met the merger patterns described in Subparagraphs 2 and 5 of Paragraph 1 of Article 10 of the Fair Trade Law. Meanwhile, the hydrogen and acetylene produced by BOC LienHwa and the acetylene produced by Ting Bao Corp. accounted for more than one quarter of the corresponding markets in the country in 2015 and the acetylene produced by both enterprises after the merger would account for over one third of the domestic acetylene market. The condition was covered by the provisions in Subparagraphs 1 and 2 of Paragraph 1 of Article 11 of the Fair Trade Law. Consequently, a pre-merger notification was filed with the FTC.
2. Both BOC LienHwa and Tung Bao Corp. sold acetylene and hydrogen. Hence, it would be a horizontal merger. Acetylene was mainly used in metal cutting and welding. As far as the way of its production is concerned, acetylene can be divided into calcium carbide acetylene and petrochemical acetylene. The two merging parties mainly sold petrochemical acetylene and Chinese Petroleum Corporation (hereinafter referred to as CPC) was the only petrochemical acetylene supplier in Taiwan. Due to the facts that the expected operating life of its production equipment is limited and the production cost of petrochemical acetylene is rather high, CPC� production of petrochemical acetylene will eventually come to a halt. Therefore, the production activities of the two merging parties would still be restricted by the acetylene supply from CPC. In the meantime, the FTC sent written requests for the opinions of the competitors and downstream businesses of the merging parties as well as related trade unions; they all responded that the intended merger would have no impact on their operations or the prices of related products. In addition, the acetylene market did not include only homogeneous products whereas the costs and production equipment were asymmetrical. As a result, collusion would be unlikely. According to the result of the FTC survey, if the merging parties increased the price, those operating at the downstream could switch to other trading counterparts, produce their own or import acetylene since there was no legal, capital or tariff barrier for acetylene importation. Neither was there any significant restriction on productivity increase or entry to the corresponding market where there were other large suppliers to provide liquefied petroleum gas and acetylene. Therefore, the merger would not lead to any competition restraint.
3. Grounds for disposition:
   Tung Bao Corp. completed the construction of its Kaohsiung Hydrogen Plant in Jul. 2015. However, due to limited technical capacity, it was unable to mass-produce hydrogen that is necessary for advanced products. In consequence, production costs became too high and the company� operating profit dropped in 2015. BOC LienHwa was able to produce high-quality hydrogen, but its Kaohsiung Hydrogen Plant had been in operation for over 20 years. The equipment of its Kaohsiung Hydrogen Plant was old and inefficient. As a result, the yield could not meet the demand from the hi-tech industry in the southern part of Taiwan. If the merger was completed, the transportation efficiency of the merging parties; the acetylene production and transportation safety of Tung Bao Corp. all can be improved. Therefore, the FTC cited Paragraph 1 of Article 13 of the Fair Trade Law and gave the merger a green light while concluding the overall economic benefit of the merger would be greater than the disadvantages incurred from any competition restraint brought by the merger.