Fair Trade Law Q&A - Merger

Not all mergers and acquisitions are subject to pre-merger notification to the Fair Trade Commission. Under Article 11, Paragraph 1 of the Fair Trade Act, a pre-merger notification is required where a transaction falls within any of the following circumstances:

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 thresholds announced by the Fair Trade Commission are as follows:

1. Where the combined worldwide sales of all participating enterprises in the preceding fiscal year exceed NT$50 billion, and at least two of the enterprises each have domestic sales exceeding NT$3 billion;
2. Where non-financial enterprises are involved, and one participating enterprise has domestic sales exceeding NT$20 billion and another participating enterprise has domestic sales exceeding NT$3 billion;
3. Where financial institutions are involved, and one participating enterprise has domestic sales exceeding NT$40 billion and another participating enterprise has domestic sales exceeding NT$3 billion.

For the calculation of sales, the sales of enterprises that have a controlling and controlled relationship with any participating enterprise, as well as enterprises controlled by the same parent or group of controlling enterprises, shall be included.

Certain business combinations that do not affect market structure or competition are exempt from notification under Article 12 of the Fair Trade Act, including:

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.