1.1 Please provide a brief overview of your jurisdiction's merger control legislative and regulatory framework.
The Fair Trade Act (FTA), which entered into force in 1992, is the main legislation governing Taiwanese merger control. Merger control is enforced by the Taiwan Fair Trade Commission (TFTC). The rules are moderately onerous as filing is mandatory in the event the applicable jurisdictional thresholds are met and closing must be suspended pending clearance.
Where any enterprises fail to comply with the rules, the TFTC may prohibit such merger, prescribe a period for the enterprises to split, to dispose of all or a part of the shares, to transfer a part of the operations or to remove certain persons from positions or make any other necessary dispositions. Further, an administrative fine of between NT$200,000 ($6,750) and NT$50 million may be imposed upon such enterprises.
1.2 What have been the key recent trends and developments in merger control?
On December 2 2016, the TFTC announced the introduction of a new sales revenue notification threshold for merger control: if the combined global turnover of the parties exceeds NT$40 billion and the Taiwan turnover of any two of the parties each exceeds NT$2 billion separately, a notification of such transaction will be required.
Also, a newly amendment to the FTA came into effect on June 16 2017. In the amendment, the review period of merger filings by the TFTC may be extended to 90 working days at most, and the TFTC is provided with the discretion to seek external opinion, and if necessary, appoint an academic research institution to conduct industrial economic analysis to supplement its review of the merger filing. In addition, the TFTC shall provide necessary merger filing information to the targeted enterprise in a hostile acquisition and consult with the targeted enterprise.
1.3 Briefly, what is your outlook for merger control over the next 12 months, including any foreseeable legislative reform/revisions?
Pursuant to the new sales revenue notification threshold of merger application, the chances of merger participants requiring a notification may increase. Further, with the extension of the review period of merger filings by the TFTC and the additional procedure applicable to hostile acquisitions, participants in a merger transaction should be aware of the new review period to avoid any delay or postponement of the deal. The potential increase of required information resulting from the consultations with a targeted enterprise and the public by the TFTC for the merger filing in a hostile acquisition is also worth monitoring in the future.
SECTION 2: Jurisdiction
2.1 What types of transactions are caught by the rules? What constitutes a merger and how is the concept of control defined?
Under the FTA, the following business combinations (the subject of a review by the TFTC in Taiwan) are caught:
- an enterprise holding or acquiring the voting shares of or making capital contributions to another enterprise to an extent of more than one-third of the total voting shares or capital of such other enterprise;
- an enterprise being assigned by or leasing from another enterprise the whole or the majority of the business or properties of such other enterprise;
- an enterprise operating jointly with another enterprise on a regular basis or being entrusted by another enterprise to operate the latter's business; or
- an enterprise directly or indirectly controlling the business operation or the appointment or discharge of personnel of another enterprise.
2.2 What are the jurisdictional thresholds for notification? Can the authorities investigate a merger falling below these thresholds?
A transaction may require notification if one of the following market share thresholds and/or sales amount thresholds is met:
- as a result of the business combination, the enterprise(s) will have one-third of the market share; or
- one of the enterprises in the business combination has one-fourth of the market share; or
- if the Taiwan turnover of one party exceeds NT$15 billion (NT$30 billion if the parties are financial institutions) and the Taiwan turnover of a second party exceeds NT$2 billion; or
- if the combined global turnover of the parties exceeds NT$40 billion and the Taiwan turnover of any two of the parties each exceeds NT$2 billion separately.
The sales amount threshold is relatively clear. The market share, however, is difficult to calculate and may bring uncertainty about filing. The TFTC cannot investigate mergers falling below these thresholds.
2.3 Are foreign-to-foreign transactions caught by the rules? Is a local effect required to give the authority jurisdiction to review it?
Foreign-to-foreign mergers may be required to notify the TFTC if the transaction has a direct, actual and reasonably foreseeable impact on the Taiwan market. Factors such as the impact of the contemplated transaction on other jurisdictions as compared to Taiwan may be taken into consideration by the TFTC for determination.
SECTION 3: Notification
3.1 When the jurisdictional thresholds are met, is a filing mandatory or voluntary? What are the risks/sanctions for failing to notify a transaction and closing prior to clearance?
If relevant thresholds are met, filing is mandatory. Closing must be suspended pending clearance.
Where any enterprises fail to comply, the TFTC may prohibit such merger, prescribe a period for the enterprises to split, to dispose of all or a part of the shares, to transfer a part of the operations, or to remove certain persons from positions, or make any other necessary dispositions. Further, an administrative fine of between NT$200,000 and NT$50 million may be imposed upon the enterprises. Between 2008 and November 2017, there were 25 instances that the TFTC penalised parties for failing to make merger filings.
3.2 Who is responsible for filing? Do filing fees apply?
All participants are responsible for filing in mergers and in cases where an enterprise is assigned by or leases from another enterprise of the operations or assets of another; or, an enterprise regularly runs operations jointly with another, or is commissioned by another enterprise to run operations. The acquirer or the controlling enterprise is responsible for filing in cases where an enterprise holds or acquires shares or capital contributions of another enterprise; an enterprise directly or indirectly controls the business operations or the appointment or discharge of personnel of another enterprise.
The TFTC does not require a filing fee.
3.3 Is there a deadline for filing? What are the filing requirements and how onerous are they?
Although there is no legal deadline for the filing, the closing of a transaction requiring a merger filing must be suspended pending clearance.
Requirements for a filing include: type and substance of the merger; basic data on each participating enterprise; explanation of the benefits of the merger for the overall economy; and any disadvantages due to restraints on competition, major future operating plans of the participating enterprises, production and marketing statistics, along with upstream and downstream competitive enterprises of the participating enterprises.
3.4 Are pre-notification contacts available, encouraged or required? How long does this process take and what steps does it involve?
Pre-notification contacts are not required under the FTA. Thus, there is no formal process at the pre-notification stage.
Pre-notification contacts are available under the current practices in Taiwan. To confirm whether filing thresholds are met and thus a filing required, enterprises tend to seek opinions from the TFTC in written or
oral form prior to official filing. Upon receipt of such inquiry, the TFTC may review the documents and descriptions provided, discuss with merger participants, and perhaps issue a formal written response regarding whether the filing threshold is met. However, recently the TFTC has been more reluctant to provide confirmation as to whether a filing is required prior to formal filing. Instead, the TFTC is more likely to suggest the merger participants carefully determine if the filing thresholds are met and a formal filing is required in accordance with the FTA.
SECTION 4: Review process and timetables
4.1 What is the standard statutory timetable for clearance and is there a fast-track procedure? Can the authority extend or delay this process? What are the different steps and phases of the review process?
After the amendment of the FTA dated June 16 2017, the TFTC has 30 working days from the receipt of a complete set of filing information to review the contemplated transaction.
In particular cases, such as where the total market share of the enterprises in a horizontal merger does not reach 20% of the market or where the total market share of the enterprises in a vertical merger does not reach 25% of each individual market, the TFTC may review the contemplated transaction under a simplified procedure. The TFTC will notify the filing enterprise of such procedure within 14 working days from the receipt of a complete set of filing information. The reviewing period may be shortened by half the ordinary period under the simplified procedure.
The TFTC may extend the review period for another 60 working days on top of the ordinary 30-working day period as it deems necessary. Although there are no specific or determined steps or phases for the review process, any third party may challenge the proposed merger and provide their comments during the seven-day TFTC public opinion solicitation period generally in the very beginning of the review period.
4.2 What is the substantive test for clearance? What are the theories of harm the authorities will investigate? To what extent does the authority consider efficiencies arguments?
The test for clearance and relevant factors taken into consideration by the TFTC may differ based on whether the type of such merger is a horizontal, vertical or conglomerate merger. The TFTC will normally look to factors such as any significant concerns about the restraints on competition and the benefits of such merger for the overall economy (including the impact on related upstream and downstream market and the impact on the market and on the participating enterprises if the combination is rejected).
4.3 Are remedies available to address competition concerns? What are the conditions and timing issues applicable to remedies.
The TFTC may attach conditions or require undertakings in any of the decisions it makes on filing cases. These are similar to remedies, and are included in order to ensure that the overall economic benefit of the merger outweighs the disadvantages resulting from competition restraint.
In practice, the TFTC may give its conditional approval with structural attachment (such as requiring the participants in a merger to dispose of its shares or properties) or behavioural attachment (such as requiring
participants to give authorisation to non-participants in using their intellectual properties) upon the participating enterprises for a specific period commencing from the effective date of such transaction. The TFTC may ask the advice of the participating enterprises about the conditions or undertakings required before making its decisions.
SECTION 5: Judicial review
5.1 Please describe the parties' ability to appeal merger control decisions and the time-limits applicable. What is the typical time-frame for appeals.
Under the FTA, the parties may be able to file for administrative litigation directly without going through administrative appeal within two months upon the receipt of the merger control decisions. The typical time-frame for a decision in such appeals may generally take around 1.5 years in a high administrative court.
|About the author|
Margaret Huang is a partner at LCS & Partners and has extensive experience in antitrust law. She has handled merger notifications and waiver filings with the Fair Trade Commission for all of the firm'smergers and acquisitions transactions, and has assisted several multinational clients in resolving all of their antitrust law issues in Taiwan. She has also been involved in amendments to Taiwan's Fair Trade Act. Huang is a member of the Arbitration Association of the Republic of China (Taiwan), and has published numerous articles regarding antitrust law issues in professional journals and newspapers.
|About the author|
Victor Chang has extensive multi-jurisdiction transactional experience in M&A, private equity fund formations and cross-border transactions of all types, frequently involving parties from the US, Europe, Taiwan and China. Before joining LCS & Partners in 2003, Chang was deputy general counsel of Trader Classified Media, and also practised for seven years in Boston, Massachusetts with the law firm Testa Hurwitz & Thibeault. Since 2003, Chang has represented numerous principals in the formation of Greater China private equity and hedge funds, with aggregate LP commitments in excess of $3.95 billion. During that time, Chang has represented investors and entrepreneurs in over 50 venture capital and private equity investments involving operating companies in China, and IPOs via the TWSE, GTSM, HKSE, NYSE and Nasdaq. He has been recognised as a leading attorney in the areas of private equity and venture capital by Asialaw.