Newsletter
JOINT INVESTMENT COMPANIES MAY HAVE TO APPLY FOR FTC APPROVALS
In 1992, the Fair Trade Commission (FTC) interpreted the term "combination" under the Fair Trade Law to apply only to companies existing at the time of the combination. This excludes any joint venture company created by multiple parties, in which case no application for a combination approval is required.
But recently, the FTC issued an approval for Sanyang Industries, Yamaha Taiwan, and nine other domestic companies to organize a joint venture company, through which they will jointly engage in R&D, design, and production of sports motorcycles through 31 December 2000. In this case, the FTC characterized such joint venture activities as a concerted action subject to the scruting of the FTC.
The FTC's decision as to whether a joint venture company is to be considered a combination or a concerted action could be based on two tests. First, if the joint venture company is to be a permanent company, it counts as a combination, but if it is created only to achieve a certain business goal of the investing companies, and is to be dissolved afterwards, then it counts as a concerted action. Second, the FTC may consider the new company's future business situation and its relationship to its investors. If the new company is to operate independently, and does not act as an intermediary between its various investors, then it is a combination; otherwise it is a concerted action.