Newsletter
FTC ISSUES GUIDELINES ON PRE-COMBINATION NOTIFICA-TION REVIEW
On 6 July 2006 the Fair Trade Commission (FTC) issued the Guidelines for Handling Pre-Combination Notification, which took effect immediately. The main points of the Guidelines are as follows:
Definition of terms: A "horizontal combina-tion" is a business combination between en-terprises that are in a horizontal competitive relationship; a "vertical combination" is a combination between enterprises in an up-stream supplier/downstream purchaser rela-tionship; a "conglomerate combination" is a combination between enterprises that are neither in a horizontal competitive relation-ship nor in an upstream/downstream rela-tionship.
Basis for identifying specific markets: Spe-cific markets will be identified by making an overall assessment based on product markets and geographical markets. Product market means a scope of goods or services that have a high degree of substitutability of demand or supply in terms of functionality, characteris-tics, application, or price. Geographical market means, with respect to a specific good or service supplied by an enterprise partici-pating in a business combination, a regional scope within which trading counterparties can easily select, or transfer their business to, other trading counterparties. In addition to consid-ering such product markets and geographical markets, the FTC may, with respect to indi-vidual cases, consider the influence of the factor of time on the scope of specific markets.
Simplification of review procedures: The FTC's procedures for reviewing business combination filings include a summary pro-cedure and an ordinary procedure. Where a proposed combination meets the conditions for the summary procedure, only two years' production and sales information is required (as opposed five years for the ordinary pro-cedure), and the information on competing enterprises is required only for the three larg-est competitors (as opposed to the five largest for the ordinary procedure). Such cases may also be subject to a shorter waiting time.
Types of pre-combination notification eligible for summary procedure: The summary pro-cedure may apply to business combinations of the following types:
1.A combination between enterprises that are required to file a pre-combination notifica-tion because their sales volume in the pre-vious accounting year exceeded the threshold announced by the FTC, but which meet one of the following conditions in terms of market share:
a.In the case of a horizontal combination, the combined market share of the par-ticipating enterprises is less than 15%. However, ordinary procedure will still apply if the combined market share of the enterprises with the two largest market shares in the specific market is at least two thirds, or the combined market share of the enterprises with the three largest market shares is at least 75%.
b.In the case of a vertical combination, the sum of the participating enterprises' market shares in their respective mar-kets is less than 25%.
2.A conglomerate combination, if the FTC determines that there is no likelihood of potential major competition between the participants.
3.A change in the form of combination be-tween enterprises that are already in a rela-tionship of subordination and control, in one of the following ways:
a.A combination between two enterprises, one of which already directly holds more than one third but less than one half of the voting shares or capital of the other.
b.A combination between an enterprise and a subsidiary of its subsidiary. Sub-sidiary here means a company in which an enterprise directly holds at least 50% of the voting shares or capital.
Exceptions to summary procedure: Where a notification would normally qualify for the summary procedure, the FTC may still apply the ordinary procedureunder any of the fol-lowing circumstances:
1.The combination affects a major public interest.
2.One of the parties to the combination is a holding company within the meaning of the Financial Holding Company Act or of the Taiwan Stock Exchange Corporation Regulations for the Review of Stock Ex-change Listing Applications by Investment Holding Companies.
3.The scope of the relevant specific markets cannot easily be determined, or the market shares of the participating enterprises cannot easily be calculated.
4.The specific markets in which the partici-pating enterprises are active have high en-try barriers or a high degree of market concentration, or there are other circum-stances causing concern that major harm would arise from restraint of competition.