Fair Trade Law Q&A - Merger

A1:

The term "merger" as used in the Fair Trade Law means any one of the following conditions:

1. where an enterprise and another enterprise are merged into one?
2. where an enterprise holds or acquires the shares or capital contributions of another enterprise to an extent of more than one third of the total number of voting shares or total capital of such other enterprise?
3. where an enterprise is assigned by or leases from another enterprise the whole or the major part of the business or assets of such other enterprise?
4. where an enterprise operates jointly with another enterprise on a regular basis or is entrusted by another enterprise to operate the latter's business? or
5. where an enterprise directly or indirectly controls the business operation or the appointment or discharge of personnel of another enterprise.

The scope of term "enterprise" as used in the Fair Trade Law includes not only companies but also sole proprietorships and partnerships, trade associations, and any other person or organization engaging in transactions through the provision of goods or services. The term "merger" in the Fair Trade Law refers not only to two enterprise merged into one but also to other arrangements by which an enterprise may obtain assets or shares of another enterprise or control its business operations or the appointment and discharge of its personnel. Analyzed from this perspective, the definition of "merger of enterprises" in the Fair Trade Law is broader in scope than that of "merger of companies" in the Company Act.

Relevant article(s) of law: Fair Trade Law, Articles 10,11,12, and 13

A2:

Not all the mergers and acquisitions between enterprises need to file a pre-merger notification to the FTC. Only the merger that falls within any of the following circumstances described in Article 11(1) of the Fair Trade Law shall be filed with the competent authority in advance:

1. as a result of the merger the enterprise(s) will have one third of the market share
2. one of the enterprises in the merger has one fourth of the market share or
3. sales for the preceding fiscal year of one of the enterprises in the merger exceeds the threshold amount publicly announced by the competent authority.

The current sales calculation standards announced by the FTC:

1. The combined worldwide sales in the preceding fiscal year of all the enterprises in the merger exceed NT$40 billion and the domestic total sales of each of at least two of the enterprises in the merger in the preceding fiscal year also surpass NT$2 billion.
2. The enterprises in the merger are not financial institutions and the domestic total sales of one of the merging parties in the preceding fiscal year exceed NT$15 billion while the domestic total sales of one of the other merging parties in the preceding fiscal year also surpass NT$2 billion.
3. The enterprises in the merger are financial institutions and the domestic total sales of one of the merging parties in the preceding fiscal year exceed NT$30 billion while the domestic total sales of one of the other merging parties in the preceding fiscal year also surpass NT$2 billion.

The sales of enterprises controlling and affiliated with a merging party and the sales of affiliated enterprises controlled by the same enterprise or enterprises which control the merging party shall be included in sales amount calculation.

As specified in Article 12 of the Fair Trade Act, business mergers that will not change the market structure or will have no impact on market competition need not be filed.

1. Where any of the enterprises participating in a merger, or its 100% held subsidiary, already holds no less than 50% of the voting shares or capital contribution of another enterprise in the merger and merges such other enterprise.
2. Where enterprises of which 50% or more of the voting shares or capital contribution are held by the same enterprise merge.
3. Where an enterprise assigns all or a principal part of its business or assets, or all or part of any part of its business that could be separately operated, to another enterprise newly established by the former enterprise solely.
4. Where an enterprise, pursuant to the proviso of Article 167, Paragraph 1 of the Company Act or Article 28-2 of the Securities and Exchange Act, redeems its shares held by shareholders so that its original shareholders' shareholding falls within the circumstances provided for in Article 10, Paragraph 1, Subparagraph 2 herein.
5. Where a single enterprise reinvests to establish a subsidiary and holds 100% shares or capital contribution of such a subsidiary.
6. Any other designated type of merger promulgated by the competent authority.

Relevant article(s) of law: Fair Trade Law, Articles 11, and 12

A3:

According to Article 8 of the Enforcement Rules of the Fair Trade Law, a report of a merger of enterprises required by Article 11(1) of this Law shall be filed:

1. The enterprises participating in the merger, where an enterprise is merged into another, assigned by or leases from another enterprise(s) the operations or assets of another, jointly operates on regular basis with another, or is commissioned by another enterprise to run operation.
2. The enterprise that holds or acquires the shares or capital contributions of another enterprise. However, it shall be the enterprise with ultimate control if there are control or affiliation relations between the holding or acquiring enterprises, or the holding or acquiring enterprises are controlled by the same enterprise or a group of enterprises.
3. An enterprise being assigned or leasing the management or property of another enterprise is an assignee or lessee.
4. The controlling enterprise, where an enterprise directly or indirectly controls the business operations or the appointment or discharge of personnel of another enterprise.

If an enterprise required to file a merger has not yet been established, the existing enterprises participating in the merger shall file. When a financial holding company or a subsidiary controlled by the financial holding company in accordance with the Financial Holding Company Act participates in a merger, the financial holding company shall file the merger.

Relevant article(s) of law: Fair Trade Law, Article 11;
Enforcement Rules of the Fair Trade Law, Article 8

A4:

Although mergers among enterprises can reduce market competition or obstruct the function of market competition, they can also, in many instances, enhance the economic scale of production, lower product cost, increase the overall competitiveness of the resulting enterprise, or lead to a more rational production and distribution process. Therefore, when reviewing a filing the Fair Trade Commission will take into account, under Article 13 of the Fair Trade Law, both the overall economic benefit of the merger would bring and any disadvantages that would result from the restrained competition of market. Where the former outweigh the latter, the Fair Trade Commission may not prohibit the merger. In any decision it makes on a merger filing case in which it has extended the review period, the Commission furthermore may attach conditions or burdens to ensure that the overall economic benefit of the merger outweighs any disadvantages that would result from the restrained competition.

Relevant article(s) of law: Fair Trade Law, Article 13

 

A5:

As stated in Paragraphs 7 and 8 of Article 11 of the Fair Trade Law, enterprises shall not proceed to merge within a period of 30 working days starting from the date the Fair Trade Commission accepts the completed documents and information submitted. However, the Fair Trade Commission may shorten or extend the period as it deems necessary. Each extension will be 60 working days at the maximum

Relevant article(s) of law: Fair Trade Law, Articles 11