FTC DRAFTS PRINCIPLES FOR OFFSHORE MERGER CASES

11/01/2000

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In response to the ever-growing number of transnational mergers and acquisitions, the Fair Trade Commission (FTC) has drawn up its draft Principles for Handling Extraterritorial Business Combination Cases. The principles, which were drafted with reference to the principles embodied in the US competition law, took effect on 15 September 2000. The main provisions are as follows:

Extraterritorial business combination case means a combination between two or more foreign business entities outside ROC territory which meets any of the conditions prescribed in Article 6 Paragraph 1 of the Fair Trade Law (FTL), and which affects markets in the ROC directly, materially and in reasonably fore-seeable ways.

In respect of an extraterritorial business com-bination case, the FTC shall consider the fol-lowing factors to determine whether it has ju-risdiction:

1.The relative importance of the effects of the combination on relevant ROC and foreign markets;
2.The nationalities, domiciles and main places of business of the business entities involved;
3.The degree of clarity of intent to influence competition in ROC markets, and the foreseeable likelihood of such influence;
4.The likelihood that conflict of laws or poli-cies may arise with the countries of the business entities involved;
5.The feasibility of enforcing administrative sanctions;
6.The effects of such enforcement on the foreign business entities;
7.The extent of regulation by international treaties, agreements or organizations; and
8.Other factors considered important by the FTC.

If none of the business entities involved in an extraterritorial business combination has pro-duction or service facilities, distributors, agents or other substantive sales channels within the ROC, the FTC will not exercise its jurisdiction.

Where an extraterritorial combination meets the ROC market share threshold as prescribed in Article 11 Paragraph 1 of the FTL, or in-volves annual ROC sales exceeding NT$5 billion, the entities concerned shall apply with the FTC for permission before proceeding with the combination. ROC sales are to be calculated as the sum of (a) the value of the foreign entity's sales within ROC territory, and (b) the value of products or services imported from the foreign entity by ROC enterprises.

Where a foreign enterprise applies with the FTC for approval of an extraterritorial busi-ness combination, the application should be submitted by the foreign parent company of ultimate control. But where the enterprise has an affiliated enterprise, branch office or liai-son office in the ROC, that affiliate, branch office or liaison office may submit the appli-cation for the parent company. However, where necessary, the FTC may still require the parent company of ultimate control to provide relevant information.