Uni-president Enterprises & Weilih Foods

1336th Commissioners' Meeting (2017)

Case:

The FTC initiated an investigation on Uni-president Enterprises and Weilih Foods' suspected violation of failing to file a premerger notification

Keyword(s):

Instant noodles, business management, personnel appointment and dismissal

Reference:

Fair Trade Commission Decision of June 14, 2017 (the 1336th Commissioners' Meeting)

Industry:

Manufacture of Macaroni, Noodles, Couscous and Similar Farinaceous Products (0892)

Relevant Law(s):

Article 10 of the Fair Trade Law

Summary:

1. A former employee of Weilih Foods Co., Ltd. (hereinafter referred to as Weilih Foods) informed the FTC that Uni-president Enterprises Corporation (hereinafter referred to as Uni-president Enterprises) seemed to be involved in the business management of Weilih Foods. The signs of suspicious behavior included that the employees of Weilih Foods started to wear uniforms similar to those worn by the personnel of a logistics company belonging to Uni-president Enterprises, and that Weilih Foods made instant noodles for Uni-president Enterprises, etc. However, no photos and other evidences were provided by the informant to support the above suspicion. Moreover, Weilih Foods began to purchase certain raw materials from affiliates of Uni-president Enterprises and also gave its human resources outsourcing contracts, which used to be given to several human resources agencies, to a certain human resources agency presumably related to Uni-president instead. Again, no proof was available for this suspicion and the FTC therefore initiated an ex officio investigation.

2. Earlier at the 879th Commissioners' Meeting on Sep. 10, 2008, the FTC had made a decision to prohibit the merger between Uni-president Enterprises and Weilih Foods. Further, Uni-president applied for merger approval again on Jul. 2, 2010, but the FTC decided at the 982nd Commissioners'Meeting on Sep. 1, 2010 to prohibit the merger. Uni-president Enterprises took the decision made in 2010 to court and the Supreme Administrative Court sustained the original decision of the FTC. Hence, Uni-president Enterprises and Weilih Foods could not merge.
3. Findings of the FTC after investigation:
   (1) To find out whether Uni-president Enterprises actually controlled the business management of Weilih Foods directly or indirectly, the FTC issued a written request for the six major retail chains, asking them to provide the name lists of Uni-president Enterprises'and Weilih Foods'sales representatives who contacted them for business purposes, the information with regard to changes of prices of the main products, as well as scheduling of promotional sales of the two companies between 2013 and 2015. The FTC's staff members also visited the retail chains and Weilih Foods to conduct the investigation. The result of the above investigation indicated that neither company made price adjustments on its instant noodle products marketed through the six retail chains and the contact sales representatives of the two companies were also different. In other words, no evidences showed that both companies had engaged in joint marketing. As for the reduction of promotional sale activities for Weilih Foods'main products and the decrease of sale events conducted through some of the retail chains, Weilih Foods explained this had been the results of its limited productivity and its preventive policy on avoiding the fines imposed by its clients for its failing to supply adequate products. As a matter of fact, its overall number of promotional sales had not been reduced. At the same time, the company had started to make new products and the original main products were no longer the main source of its revenue.
   (2) Another finding of the investigation revealed that Weilih Foods had organized a promotional activity that included basketballs as gifts. The customer service part of the activity was indeed outsourced to an affiliate of Uni-president Enterprises, but the event was totally controlled by Weilih Foods and the outsourcing expense only accounted for a fairly small percentage of the entire cost. This could be proven with the company's internal documents. Meanwhile, the new uniforms were only for assembly line workers and they were not exactly the same as the uniforms of the logistics company belonging to Uni-president Enterprises. In addition, there were no evidences to prove the change of human resources outsourcing contractors had anything to do with Uni-president Enterprises. As for the fact that Weilih Foods made three types of instant noodles for Uni-president Enterprises, it was simply a business arrangement meant to boost the rate of its'capacity utilization. Nothing indicated that Uni-president Enterprises directly or indirectly controlled the business management of Weilih Foods.
   (3) In order to understand whether Uni-president Enterprises had intervened in Weilih Foods'personnel appointment and dismissal after it acquired certain shares of Weilih Foods, the FTC obtained insurance information from the Bureau of Labor Insurance and found out five people currently employed at Weilih Foods used to work for Uni-president Enterprises or its affiliates and the FTC invited them over to give their statements. The investigation showed the former finance and accounting section chief of Uni-president Enterprises presently served as an assistant general manager at Weilih Foods responsible for financial and accounting affairs. The present Weilih Foods general manager met the then general manager of Weilih Foods when holding a position responsible for procurement in an affiliate of Uni-president Enterprises and consequently switched to Weilih Foods to work as the executive vice general manager. Later, the board of directors promoted him to be the general manager because of his performance. This could be supported by the board of directors meeting minutes. In addition, the three remaining individuals used to be the subordinates of the current general manager of Weilih Foods when working for an affiliate of Uni-president Enterprises. Later, they found jobs with Weilih Foods as a result of the general manager's recommendations, but none of them was holding any important position. In other words, Weilih Foods offered higher salaries or better benefits to attract the five aforesaid individuals. As people moving from company to company out of their own volition was common, it was difficult to conclude with the fact of the five individuals'change of jobs as evidences that Uni-president Enterprises had intervened in Weilih Foods'personnel appointment and dismissal.
   (4) With the result of the investigation into the personnel changes and actual business management, and the verification of the evidences provided by the informer, the FTC found it impossible to consider Uni-president Enterprises and Weilih Foods had engaged in any of the merging patterns specified in the subparagraphs of Article 10 (1) of the Fair Trade Law.