Merger Control & Case Analysis

Jishyan Hwu

Senior Investigator

Fair Trade Commission(TFTC)

OECD-RCC ， Seoul, Dec ,5th –7th ,2007

Merger Regulation in TFTC

• 1992.2.4~2002.2.5 "prior approval system"

• 2002.2.6 ~ "pre-merger notification system“

• Distinguishing the publication of the sales volume thresholds between financial institutions and non-financial institution enterprises

Types of Merger

• Horizontal Merger ： firms participating have horizontal competition relation

• Vertical Merger ： firms participating have upstream, downstream relation

• Conglomerate Merger ： firms participating don’t have horizontal competition or upstream, downstream relation

FTA . Article 11(thresholds for notification, waiting period ）

• Thresholds market share– A+B>1/3– A or B>1/4

turnover– financial enterprises:

A>NT $20 billion & B>NT $1 billion– non-financial enterprises:

A>NT $10 billion & B>NT $1 billion

In most countries, they don’t use this standard as thresholds, and therefore we are estimating whether it needs to be amended .

Fair Trade Act

Article 6 （ Definition of merger ）1.Where an enterprise and another enterprise are merged i

nto 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 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 properties 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.

See the proportion of the business or how important the business or property is

Ex.take more than half seats on theboard of directors

Case 1 : Kimberly Clark Co. & Taiwan Scott Co.(1)

• Kimberly Clark corporation• Taiwan Scott corporation• Products ： facial tissue, paper towels, toilet paper,

disposable pants － family care products

Kimberly Clark Co. & Taiwan Scott Co.(2)

• Kimberly Clark corporation holds 67% stock share of • Taiwan Scott corporation and acquires another 33%• Kimberly Clark and Taiwan Scott mergered

• FTA #6-1-1 、 #6-1-2 ； #11-1-1 ，

Kimberly Clark Co. & Taiwan Scott Co.(3)

• Product market share ： family care products

• Before merger MKT share ：• Taiwan Scott － 33.42% ； Kimberly Clark －

14.23%

• Post merger MKT share ： 47.65%

Kimberly Clark Co. & Taiwan Scott Co.(4)

• Concentration rate ：• Before merger ： HHI=1765.5544

• Post merger ： HHI=2716.6776 ； ΔHHI =951.1332

• － mergers are likely to create or enhance market power or facilitate its exercise.

Kimberly Clark Co. & Taiwan Scott Co.(5)

• Global competition authorities ：• UK ： Kimberly sold a tissue paper firm • France & Italy ： Kimberly sold a brand of its

paper

• Canada & US ： Scott sold two factories • Mexico ： Scott sold a tissue paper firm

Case 2 : Merger of Nokia Co. & Simens A.G.(1)

• Norkia corporation ，• Simens Aktiengesellschaft

• Norkia Simens Networks B.V. （ Norkia :50.01% ， Simens :49.99% ） (new)

• Taiwan Norkia• Siemens Telecommunication Systems Ltd.

Merger of Nokia Co. & Simens A.G.(2)

• Taiwan Siemens sells 60% shares to Norkia Simens Networks B.V.

• Norkia & Simens transfer assets to Norkia Simens Networks B.V

• A new subsidiary of Norkia Simens Networks B.V will buy facilities from Taiwan Norkia

Merger of Nokia Co. & Simens A.G.(3)

• Sale revenue in Taiwan 2005

• Nokia ： 18.175billion(NT$)• Siemens ： 17.121billion(NT$)• FTA #6-1-2 、 #6-1-3 、 #6-1-5 ； #11-1-3

Merger of Nokia & Simens (4)

• Mobile convergence:• RAN (random access network)• CNS(core network system )• OSS ： operation support system • Fiexed Mobile Convergence :• Mobile phone to fixed line infratructure• Fiexed Mobile Convergence Alliance(FMCA):• BT 、 Swisscom 、 NTT 、 Korea Telecom 、 Brazil

Telecom 、 Rogers Wireless

Merger of Nokia & Simens (5)

• Access to the MKT :• Minimun operation capital ： no• Law or regulation to the MKT:no• IP holder or not : Optional not mandatory• Raw material providence: global • Tariff or non-tariff obstacles:no• FC / TC: Nokia :3%, Simens:5~10%

Merger of Nokia & Simens (6)

• Mkt share & Concentration rate :• Before merger MKt share ： Nokia :17% ， Simens :5% ，

Motorola:16% ， Nortel :14 ， Alcatel 9 ， Ericsson ： 7% ； Top2 MKT share :33% ， Top3 MKT share :47%

• Post merger MKT share : Nokia ＋ Simens:22% ， Top2 MKT share :38% ， Top3 MKT share :52%

• Before merger ： 1800 ＞ HHI ＞ 896-middle or low Cr• Post merger ： Δ HHI=170 • Other competitiors ： NEC 、 Cisco 、 Huawei 、 ZTE 、 J

uniper 、 Sonus Network 、 US starcom 、 Takelec 。

Merger (7) –Concentration level

EU － Post-merger, HHI ＜ 1000 - unlikely to identify horizontal competition concerns and normally don’t require extensive analysis – Post-merger , HHI ＝ 1000~2000 ， and ΔHHI ＜ 25

0

Post-merger , HHI ＞ 2000 ， andΔHHI ＜ 150

- unlikely to identify horizontal competition concerns except there are special circumstances.

Merger (8) –Concentration level

• USA － Post-merger, HHI ＜ 1000 ( unconcentrated) - unlikely to have adverse competitive effects and ordinarily require no further analysis. – Post-merger, HHI ＝ 1000~1800(moderately concentrate

d) -If ΔHHI<100,mergers are unlikely to have adverse com

petitive consequences and ordinarily require no further analysis

– HHI ＞ 1800 (highly concentrated)-If ΔHHI＞ 100,mergers are likely to create or enhance market power or facilitate its exercise.

– l

Merger (9) － Effect of the merger

– Disadvantages resulted from competition restraint -t

he increase in both its business operations and market s

hare will be minimal..

– the overall economic benefit- the operation cost of tel

ecommunication will be decreased ; enhance innovatio

n of competitors ； cost saving for mergered enterprise

s and good telecom service will be provided at more re

asonable price ; .

Merger of Nokia Co. & Simens A.G.

• Global Competition Authority

• FTC(Federal Trade Commission ) (10.30. 06’)• EU(yes)• IAA(Israel Antiutrust Authority) מידע שימושי • (yes)

Thanks for your attention

drhu@ftc.gov.tw