According to the Fair Trade Act ("FTA"), if a proposed transaction between enterprises meets the definition of combination and these enterprises have reached the turnover filing threshold or market share filing threshold set by the FTA, a prior combination notification should be submitted to the Fair Trade Commission (FTC). This notification requirement/prescription remains unchanged in the newly-amended FTA, which came into effect earlier this year. However, in terms of the merger control rules, the relevant provisions regarding the definition of combination, the calculation of the filing threshold, the scope of the notifying parties, the review procedure, the types of exemptions, and punishment have all been amended, which greatly affects the merger filing practice. Below please find a summary of the key amendments.
I. Definition of Combination (Article 10)
When analyzing whether a proposed transaction falls within the definition of "holding or acquiring the voting shares of or interest in another enterprise," the shares or interest held or acquired by an enterprise, (where both, it and the participating parties, are controlled by the same enterprise) should be included. In other words, the shares/interest held by the participating parties' "brother companies" should also be counted in the evaluation of whether one-third of the voting shares of or interest benchmark has been exceeded and hence falls within the definition of combination.
II. Calculation of Filing Threshold (Article 11)
The dual filing threshold system, in which both the turnover filing threshold and market share filing threshold are applicable, has not been amended. However, the "group company" concept wasintroduced for calculating the turnover filing threshold. In the past, only the turnover of the participating party was considered when calculating the turnover filing threshold. However, under the new law, the turnover generated from all the group companies should also be counted in the calculation. In other words, the turnover of (i) any enterprise having controlling or subordinated relationship with the participating parties, and (ii) brother companies of the participating parties, should be included when assessing whether the turnover filing threshold has been met.
Additionally, under the new law, the turnover filing threshold has been raised. For a combination between non-financial enterprises, one of the enterprises will need to generate an annual turnover of at least NT$15 billion, while the other enterprise will need to generate an annual turnover of at least NT$2 billion. For a combination between financial enterprises, one of the enterprises will need to generate an annual turnover of at least NT$30 billion, while the other enterprise will need to generate an annual turnover of at least NT$2 billion. The new law also permits the FTC to announce turnover filing thresholds applicable to different industries.
III. Scope of Notifying Parties (Article 11)
In the past, the merger control rules were only applicable to an "enterprise" defined by Article 2 of the FTA. However, under the new law, those natural persons or non-corporate groups which have controlling shareholding should also be subject to the merger control rules. The said "controlling shareholding" refers to the circumstance where the natural person(s)/non-corporate group and their related persons, hold a majority of the total number of outstanding voting shares or the total capital of an enterprise. In relation to the definition of "related persons," reference can be made to the definition set forth in Paragraphs 2 and 3, Article 4 of the Financial Holding Company Act.
IV. Review Procedure (Article 11)
The review period for a merger filing case has been revised from 30 days with a possible extension of an additional 30 days to a possible extension of an additional 60 days as the original period may not be sufficient for the agency to thoroughly analyze a case which may have potential anti-competition effect.
V. Types of Exemptions (Article 12)
Two types of exemptions have been newly enacted: (1) a combination between a wholly owned subsidiary and a "grandson company" within the same group, and (2) a single enterprise reinvesting to establish a subsidiary and holds 100% shares or capital contribution of the subsidiary. Meanwhile, the FTC is authorized to promulgate any other type of exemption.
VI. Punishment (Article 39)
According to the new law, the minimum fine for any violation of the merger control rules was increased to NT$ 200,000 and the maximum fine was increased to NT$ 50 million. Furthermore, where any enterprise proceeds with a merger, in which the filing contains any false or misleading item, the FTC may prohibit such a merger, prescribe a period for the enterprise to split, to dispose of all or a part of the enterprise's shares, to transfer a part of the operations, or to remove certain persons from their positions or make any other necessary disposition and may impose a fine of no less than NT$ 100,000 but no more than NT$ 1 million.