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Merger Control & Case Analysis

Merger Control & Case Analysis. Jishyan Hwu Senior Investigator Fair Trade Commission(TFTC) OECD-RCC ， Seoul, Dec ,5 th –7 th ,2007. Merger Regulation in TFTC 1992.2.4~2002.2.5 "prior approval system" 2002.2.6 ~ "pre-merger notification system“

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Merger Control & Case Analysis

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  1. Merger Control & Case Analysis Jishyan Hwu Senior Investigator Fair Trade Commission(TFTC) OECD-RCC， Seoul, Dec ,5th –7th ,2007

  2. 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

  3. 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

  4. 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 .

  5. . Fair Trade Act Article 6（Definition of merger） 1.Where an enterprise and another enterprise are merged into 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;

  6. See the proportion of the business or how important the business or property is 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. Ex.take more than half seats on the board of directors

  7. 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

  8. 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，

  9. 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%

  10. 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.

  11. 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

  12. 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.

  13. 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

  14. 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

  15. 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

  16. 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%

  17. 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、Juniper、Sonus Network、US starcom、Takelec。

  18. 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＜250 Post-merger , HHI＞2000，andΔHHI＜150 - unlikely to identify horizontal competition concerns except there are special circumstances.

  19. 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 concentrated) -If ΔHHI<100,mergers are unlikely to have adverse competitive 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

  20. Merger (9) －Effect of the merger • Disadvantages resulted from competition restraint -the increase in both its business operations and market share will be minimal.. • the overall economic benefit- the operation cost of telecommunication will be decreased ; enhance innovation of competitors；cost saving for mergered enterprises and good telecom service will be provided at more reasonable price ; .

  21. 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)

  22. Thanks for your attention drhu@ftc.gov.tw

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