The Taiwan Fair Trade Act (TFTA) is the relevant merger control legislation in Taiwan, which was last amended on 14 June 2017 with the newly amended Enforcement Rules of the TFTA (“Enforcement Rules”) being announced on 7 April 2022. The supplementary rules on merger control include the Directions for Enterprises Filing for Mergers, the Taiwan Fair Trade Commission Disposal Directions (Guidelines) on Handling Merger Filings (“Merger Guidelines”), the Taiwan Fair Trade Commission Disposal Directions (Guidelines) on Extraterritorial Mergers and the Guidelines on the Provision of Pre-Filing Consultation Service.
See 9.1Recent Changes or Impending Legislation for details of a series of amendments to the merger control regime that the Taiwan Fair Trade Commission (TFTC) is considering.
The Taiwan Fair Trade Commission Disposal Directions (Guidelines) on Extraterritorial Mergers is the relevant legislation for merger filings related to foreign mergers. The filing requirements (thresholds, timeframe, documents, etc) for foreign mergers are the same as those for domestic transactions. However, the TFTC will take the local effect into consideration when determining whether it will exercise the jurisdiction.
In Taiwan, there is no other legislation for mergers relating to particular sectors. However, under several of the TFTC’s guidelines on sectoral control of certain industries affecting public welfare, such as airlines, banking/finance, or 4C industries, certain specific factors will be taken into account by the TFTC when reviewing a merger involving that particular industry.
The TFTC is the competent authority enforcing the TFTA. It is not only the regulatory body responsible for the execution of the TFTA, but also the agency which interprets the TFTA by rulings and stipulates the enforcement rules and relevant regulations of the TFTA. The TFTC may seek comments from other authorities during the review process but the TFTC has the final say on its decision.
If any of the filing thresholds is met, a notification is compulsory.
The following circumstances are exceptions for a notification even if the filing thresholds are met:
On 18 July 2016, a ruling was promulgated by the TFTC to exempt the following types of transactions from the requirement to make a filing:
For a foreign-to-foreign transaction, the TFTC may not exercise its jurisdiction when such combination has no direct, substantial and reasonably foreseeable effect on the Taiwan market (ie, local effect). However, as the TFTC has the sole discretion to determine whether the local effect exists in the proposed transaction, the parties to a foreign-to-foreign transaction can still submit the notification to avoid any non-compliance risk.
Failing to notify a combination that meets a filing threshold may cause the TFTC to impose penalties including the prohibition of the combination, divestiture, transfer of the business acquired, and/or removal of personnel designated by the enterprises if the TFTC discovers such violation. The TFTC is also authorised to impose an administrative fine of between TWD200,000 and TWD50 million.
Penalties imposed on parties for violation of merger control rules will be published by the TFTC. Public information shows that there was no penalty imposed during 2021 in terms of merger control violation.
According to the TFTA, a transaction that falls under the definition of a “combination” which also meets certain thresholds as prescribed by the TFTA, requires a notification to the TFTC in advance. According to the TFTA, a “combination” is broadly defined to include:
(i) mergers;
(ii) holding or acquisition of one-third or more of the voting shares of, or interest in, another enterprise;
(iii) a transfer or lease of the whole, or a substantial part of, an enterprise’s business or assets;
(iv) a contractual arrangement with another enterprise for joint operation on a regular and ongoing basis, or the management of another enterprise’s business on a contract of entrustment; and
(v) a direct or indirect control over the business operation or personnel management of another enterprise – whether “control” exists should be evaluated on a case-by-case basis since there is no definitive definition thereof.
Internal restructuring or reorganisation, under certain circumstances, may fall into the exceptions under the TFTA and be exempted from a filing obligation. Please refer to 2.1 Notification for details. An operation that does not involve the transfer of shares or assets (eg, shareholders’ agreements, contractual arrangement on joint business operation) will constitute a combination only if it falls under the combination defined under (iv) or (v) set forth above.
Whether “control” exists is not defined under the TFTA, and thus should be evaluated on a case-by-case basis.
Acquisition of a minority shareholding or other interests less than control will constitute a combination only if it falls under the combination defined under (ii), (iv) or (v) as set forth in 2.3 Types of Transactions.
Under Article 11 of the TFTA, a notification would be required if:
Paragraph 2, Article 11 of the TFTA specifically stipulates that the turnover should be calculated on a “group/consolidated” basis by including the sales revenues of an enterprise that is controlled by, controlling, or affiliated with the enterprise in the combination, and of an enterprise where both itself and the enterprise in the combination are under common control of the same enterprise or enterprises.
The “control/subordinate” relation under Article 11 Paragraph 2 of the TFTA above is further explained in Article 6 of the Enforcement Rules. The details are as follows.
Please note that for foreign entities, when calculating the turnover threshold, only the Taiwanese sales are relevant, which shall include (i) sales generated “in” Taiwan by the parties’ affiliates, branch offices, or any other entities defined by Paragraph 2, Article 11 of the TFTA, and (ii) direct sales “into” Taiwan by selling to Taiwanese customers.
For more details on the calculation of the jurisdictional thresholds, please see 2.5 Jurisdictional Thresholds. The TFTA is silent on the conversion of the sales booked in a foreign currency. In practice, using the annual average exchange rate published by the Central Bank of Taiwan for the conversion is acceptable to the TFTC.
For details, please see 2.5 Jurisdictional Thresholds.
Specifically, Paragraph 2, Article 11 of the TFTA stipulates that the turnover should be calculated on a “group-wide /consolidated” basis – ie, by including the sales amount of an enterprise that is controlled by, controlling, or affiliated with the enterprise in the combination, and of an enterprise where both itself and the enterprise in the combination are controlled by the same enterprise or enterprises.
The TFTA is silent on whether any change in the business during the reference period (such as other acquisitions, divestments or business closures) should be factored in when calculating the turnover; however, in general, the TFTC accepts the annual turnover figures stated in the parties’ audited financial statements as the benchmark to calculate the turnover.
As long as a foreign-to-foreign transaction falls under the definition of a combination as stated in 2.3 Types of Transactions, and it meets any of the filing thresholds as provided in 2.5 Jurisdictional Thresholds, such transaction is subject to the merger control in Taiwan.
There is a local effects test under the TFTA. According to the Guidelines on Handling Extra-territorial Mergers, which were last amended in December 2016, after weighing the following factors, the TFTC may decide not to exercise its jurisdiction over a pure foreign-to-foreign transaction, considering:
Thus, parties to an extraterritorial combination may, based on their own assessment of the factors above, conclude that due to lack of local effect arising from the proposed transaction, no filing is required in Taiwan. Despite the aforesaid, it is the TFTC who has the final say on whether a filing would be required.
It is also worth noting that a filing would be required even when a target has no sales and/or assets in Taiwan as long as the transaction falls under the definition of a combination stated in 2.3Types of Transactions and the parties meet any of the filing thresholds stated in 2.5Jurisdictional Thresholds.
Given that the TFTA does not limit the filing threshold assessment to only overlapping products/services, it is possible for one party – either a target or an acquirer – to meet the threshold in the absence of a substantive overlap.
Joint ventures are likely to be covered by the merger control rules, as long as they meet the definition of combination under the TFTA and any filing threshold is triggered.
The term “joint venture” is not defined under the TFTA. However, the TFTC ruled in 2002 that the establishment of a joint venture, whether it is a newly incorporated enterprise or an existing enterprise, will be subject to merger control if it constitutes a combination defined under the TFTA. Note that a joint venture is not further categorised into different types based on its function or corporate structure by the TFTA.
The TFTC does not have the power to investigate a transaction that does not meet the jurisdictional thresholds. However, the TFTC has the power to issue letters to the parties requesting them to provide explanations and relevant documents to prove that the jurisdictional thresholds are not met, if deemed necessary.
The statute of limitation for the TFTC to enforce merger control regulations is five years.
Implementation of a transaction must be suspended until clearance is obtained.
The sanctions for implementing a transaction prior to receiving clearance are the same as those applicable for the failure to file a notification; please see 2.2 Failure to Notify. Public information revealed that no penalties have been imposed in the case of foreign-to-foreign transactions.
There are no general exceptions to or waivers from the suspensive effect.
There is no exception under the TFTA that allows parties to close the transaction prior to receiving the TFTC’s clearance. Furthermore, whether the TFTC will accept the parties’ proposal to temporarily carve-out transactions related to Taiwan is unclear, since no case precedent is available.
The law does not stipulate a deadline for making a filing. However, since the TFTC requests a definitive agreement or relevant board resolution to be submitted with the notification to evidence the parties’ intention of conducting the transaction, once the parties’ board approves the proposed transaction or completes the signing of the definitive agreement, the parties may then make a filing, which is deemed as the earliest time.
A definitive agreement or relevant board resolution to be submitted along with the notification is required in order to prove the parties’ intention of conducting the transaction. The TFTC will review whether a filing based on a less formal agreement such as a letter of intent or memorandum of understanding is acceptable in each case. If the parties are unable to provide any written agreement indicating the parties’ intention of proceeding with the proposed transaction, the TFTC may reject the filing.
No filing fee is required.
The following parties shall file a combination notification:
If an enterprise required to file has not yet been established, the existing enterprises in the merger shall file the notification. Companies considering a combination should note that the Enforcement Rules indicate that, in a combination-type acquisition of shares or capital contributions of another enterprise, if a control/subordinate relation exists between the acquirers or the acquirers are under common control of one or more entities, the ultimate parent company of the acquirers shall be the notifying party.
The information required to be included in the main context of a filing is listed as follows.
The supporting documents that should be enclosed along with a filing are listed as follows:
The language must be Chinese (Mandarin) when submitting the filing. If there is any document written in foreign language, excerpted translation should also be prepared. All other documents can be in duplicate copy, except the power of attorney should be original copies (no certifications, notarisations or apostilles are required).
In practice, the TFTC may reject the filing or request the parties to withdraw the filing if the notification is deemed incomplete after several rounds of RFIs. There is no penalty under such circumstance but the parties cannot close the deal since no clearance has been granted.
The TFTC may impose penalties including the prohibition of the combination, divestiture, transfer of the business acquired, and/or removal of personnel designated by the enterprises if the TFTC discovers such violation that the notifying party is deemed to have supplied inaccurate or misleading information in the filing and proceeds with the combination. The TFTC also has the power to impose an administrative fine of between TWD100,000 and TWD1 million.
There is no case precedent in this regard during the past five years, according to public information.
The review process is not divided into different phases by the TFTC. Rather, after the initial filing is submitted, the TFTC will request the parties to provide supplemental information by issuing request for information (RFI) letter. Until the TFTC deems all the required documents and information have been provided, such RFI procedure will end. Once the TFTC deems that the filing is complete, the waiting period can start to run. Then, the parties to the proposed transaction are free to proceed with the merger if the TFTC does not make any objection to the filing within 30 business days following the filing date (with complete documents and information). If it is deemed necessary, the TFTC may shorten the 30-day waiting period or extend the period for up to 90 business days.
The Guidelines on Offering Pre-Filing Consultation was published by the TFTC on 18 August 2021, which aims to help the notifying parties clarify certain filing related issues before the parties submit a formal filing. However, given that the TFTC’s opinions expressed in such consultation is non-binding, it is not necessarily the case that the parties will find such consultation beneficial to their filing decision. The process is treated confidentially.
The requests for information (RFI) will be issued by the TFTC during the review process requesting the parties to supplement information; such requests reset the clock. Subject to the complexity of the case, there may be two or more rounds of RFIs.
Other than the simplified procedure stated below, there is no other type of accelerated procedure or informal way to expedite the clearance.
The waiting period of the following circumstances can be shortened by applying the simplified procedure. The following circumstances are eligible for a simplified procedure.
Nonetheless, the TFTC would still request the parties to follow the standard procedure in certain situations, such as where the merger involves major public interest, or the entry barriers are high, even if they have met the above-mentioned criteria for the simplified procedure.
After all relevant factors are considered, if there is no suspicion of obvious competition restraints, the TFTC will conclude the overall economic benefits of the merger outweigh the disadvantages resulting from competition restraint. Otherwise, the TFTC should further examine overall economic benefits to determine whether the overall economic benefits of the merger outweigh the disadvantages resulting from competition restraint.
In general, to determine the markets that may be affected by the transaction, the TFTC will examine the markets where the parties’ activities overlap and/or have vertical relationship. In practice, the TFTC will also look into the parties’ respective major businesses in Taiwan from time to time, even if such businesses have no relevance to the proposed transaction. There is no de minimis concept under the TFTA.
To our knowledge, the TFTC may sometimes rely on its own case precedents to review the present case. Although the TFTC may take the case laws in other jurisdictions into consideration, it is less likely that the TFTC will solely rely on other jurisdictions’ views to make its decision.
The competition concern that the TFTC will investigate varies with the types of combinations. If the combining enterprises engage in a horizontal combination, the TFTC will take the following factors into consideration:
If the combining enterprises engage in a vertical combination, the TFTC will take the following factors into account:
When reviewing conglomerate combinations, the following factors may be considered by the TFTC to determine whether potential competition exists between the parties to a conglomerate combination:
Under the circumstances that significant potential competition is deemed likely in a conglomerate combination, it is required to further analyse the factors concerning anti-competition under a horizontal or vertical combination.
While the TFTC will certainly consider economic efficiencies when determining whether the proposed transaction will benefit the economy overall, there is no case precedent on how the TFTC weighs this factor.
Whether the TFTC will take into account any non-competition issues as part of the review process is unclear, since no case precedent is available. The TFTA or relevant regulation is silent on whether the consideration of these non-competition issues should be permitted.
The ruling for foreign direct investments in Taiwan is separate from the merger control regime. In principle, an investment into Taiwan is subject to the prior approval of the Investment Commission, the Ministry of Economic Affairs.
There are no special considerations in the substantive review of joint ventures; however, the possible co-ordination issues between joint venture parents will be examined by the TFTC.
The TFTC has the ability to prohibit or otherwise interfere with a transaction; it exercises its power by issuing a binding decision at the end of the regulatory process. Such decision is generally in one of the following four categories:
In a decision that the TFTC prohibits a combination, it will state its reasons therein regarding the anti-competition disadvantages to the Taiwan market caused by the proposed transaction.
Though the proposal of remedy mechanism is not provided in the TFTA, our experience suggests that when the TFTC has concerns about a transaction, the parties are able to propose remedies to the TFTC for its consideration. If the proposed remedies would constitute a material change to the notification, and hence the TFTC would require additional information for its evaluation, the TFTC may stop the clock and the waiting period will be reset only after the supplemental information is submitted. If the proposed remedies would not constitute a material change to the notification, the TFTC will take into account such remedies when rendering its decision on the merger notification before the waiting period expires. The TFTC will assess whether it would grant its clearance with conditions referring to such remedies.
There is no legal standard that remedies must meet in order to be deemed acceptable.
In terms of the particular kinds of remedies that are typically used in practice, since the primary purpose of the remedies is to eliminate the anti-competition concerns, most competition authorities in different jurisdictions recognise that divestitures, a type of structural remedy, are the best way to achieve such a goal. In line with these international practices, the TFTC appears to accept structural remedies for the divestitures (disposal of shares held by the party) and impose such remedies as conditions to its clearance. In fact, the public records indicate that the TFTC has indeed adopted the divestment approach in a transaction involving a cable television business.
The TFTC amended the Merger Guidelines in September 2012 to include its official standards for remedies. According to the Merger Guidelines, TFTC can impose the following remedies as conditions.
Despite the foregoing, the TFTC still reserves the right to impose other types of remedies on a case-by-case basis. The Merger Guidelines also point out that the TFTC may seek the parties’ opinions on the possible remedy before making a final decision.
Whether remedies are ever required to address non-competition issues is unclear since no case precedent is available.
The parties can begin negotiating remedies with the TFTC within the waiting period by submitting a proposal to the TFTC. Meanwhile, the TFTC has the authority to propose remedies on its own motion. Though the TFTC may choose to consult the parties before imposing the remedies, the TFTC can nonetheless impose remedies that the parties have not agreed. Regarding the procedural steps with respect to remedies, please see 5.4 Typical Remedies.
With regard to the standard approach regarding conditions and timing for divestitures or other remedies, please see 5.4 Typical Remedies for details.
Depending on the nature of that remedy, it is acceptable for the parties to complete the merger before complying with the remedies. The TFTC will conduct periodic reviews of the parties’ behaviour or divestment status to ensure that the parties comply with the conditions imposed by the TFTC.
Since the remedies will serve as conditions to the TFTC’s clearance, the parties must adhere to the conditions. In the event that the TFTC discovers any violation, the TFTC may impose penalties on the parties, including the prohibition of the combination, divestiture, transfer of the business acquired, and/or removal of personnel designated by the enterprises. The TFTC also has the power to impose an administrative fine of between TWD 200,000 and TWD 50 million.
When the TFTC clears a transaction without any condition/remedy, it will only publish a news release summarising its decision on its website and does not issue a formal decision letter. For a decision with condition/remedy or prohibiting a transaction, the TFTC will issue an official decision to the parties, which will also be published on the TFTC’s website.
Thus far, the TFTC has never imposed “structural” remedies (such as divestment of assets or disposal of shares) in foreign-to-foreign mergers. However, the TFTC has certainly attached behavioural remedies to a few foreign-to-foreign mergers, most of which involve sensitive industries such as the semiconductor or technology licensing industries.
To our knowledge, no case precedent is available in Taiwan. Thus, whether ancillary restraints (such as non-competition agreement) will be covered by a clearance decision is unclear.
Third parties (eg, customers, competitors, complainants) may have opportunities to be involved in the review process.
If the TFTC accepts a combination notification and decides to exercise its jurisdiction on the transaction, it will post a summary of the proposed transaction on its website for one week to seek public opinion. In some cases where the TFTC considers that the transaction will have a great impact on the local market, it will (i) hold a symposium or a public hearing and invite competitors, upstream and downstream enterprises, relevant competent authorities and scholars to provide their opinions, and/or (ii) issue letters to the parties’ Taiwanese customers, suppliers and sometimes competitors to seek their opinions.
As stated in 7.1 Third-Party Rights, if the TFTC accepts a combination notification and decides to exercise its jurisdiction on the transaction, it will post a summary of the proposed transaction on its website for one week to seek public opinion.
It is unclear whether the TFTC will “market test” any remedies offered by the parties.
As stated in 7.1 Third-Party Rights, if the TFTC accepts a combination notification and decides to exercise its jurisdiction on the transaction, it will post a summary of the proposed transaction on its website for one week to seek public opinion. Under such circumstances, the fact of the notification and/or description of the transaction will be publicised.
The parties may request the TFTC not to disclose the specific confidential information to the public and handle combination notifications confidentially. If the parties have any particular concerns about the TFTC's public announcement, they can also submit an application requesting the TFTC not to disclose certain information regarding the combination transaction. However, whether such request will be granted will be subject to TFTC's discretion. If the TFTC considers that the information about the transaction has an impact on the Taiwanese market, it will reject the non-disclosure request and make a public announcement soliciting the public’s opinions. Nevertheless, in general, the TFTC will not disclose the parties' commercial information specifically marked confidential in their filings to the general public, such as trade secrets.
While reviewing the filing for some cross-border transactions, the TFTC will consult the regulatory authorities of the parties’ home countries. In addition, there are several co-operation agreements and memorandums for the application of competition regulations between the TFTC and the following countries: Australia; Canada, France, Hungary, Mongolia and New Zealand. Co-operation between the TFTC and these countries can be anticipated.
It is unclear whether such co-operation is simply on general policy level or whether the TFTC exchanges specific transaction information with other jurisdictions.
In practice, the TFTC will seek the parties’ consent before sharing information with other jurisdictions.
The parties (or any interested parties with legal standing) may appeal against the TFTC’s administrative decision to the High Administrative Court for judicial review within two months of the receipt of said decision.
The procedure of administrative litigation is basically the same as the procedure of civil litigation. The case will be heard in a court and the TFTC, as the defendant, and the parties subject to the decision, as the plaintiff, will be in front of judges in a formal legal proceeding.
Although the decision of the High Administrative Court can be appealed to the Supreme Administrative Court for legal review, the Supreme Administrative Court will not hold any hearing. The High Administrative Court's judgment will be reversed only when such judgment is legally flawed.
The parties (or any interested parties with legal standing) can appeal against the TFTC’s decision to the court within two months of receipt of the decision. The timeline for an appeal is approximately 12 to 18 months. To our knowledge, during the past five years, no enterprise has filed an appeal in the High Administrative Court against the TFTC's merger filing decision.
If any clearance decision will have an adverse effect or impose burdens on a third party, such interested third party can appeal. To our knowledge, during the past five years, no third party has filed an appeal in the High Administrative Court against the TFTC's merger filing decision.
According to the announcements released by the TFTC in June 2021 and the minutes of the TFTC Commissioners’ meetings held during the second quarter of 2021, the TFTC is proposing a series of amendments to its merger control regime. The TFTC, for example, published the Guidelines on Offering Pre-Filing Consultation on 18 August 2021, aiming to assist the notifying parties in clarifying filing related issues in advance, such as type of combination and filing threshold. Other amendments include (i) modifying the Merger Notification Form, and (ii) allowing the online submission of a filing through the TFTC’s filing system.
The TFTC is also considering, among others, repealing the Disposal Directions (Guidelines) on Extraterritorial Mergers and concurrently amending the Disposal Directions (Guidelines) on Handling Merger Filings. While it is uncertain when the other proposed amendments will take effect, it is apparent that reforming the merger control regime is one of the TFTC’s enforcement priorities this year.
According to public information, the TFTC reviewed a total of 69 merger filing cases in 2021, and among them, 32 cases were approved while the review process of the other 37 cases terminated, which means that the TFTC decided to waive its jurisdiction over those cases; no case was prohibited. Public information also shows that there was no sanction decision in terms of merger control in 2021.
In March 2022, the TFTC published a draft White Paper on Competition Policy in the Digital Economy, inviting comments and feedback from the public on this draft. While the competition issues explored in the draft White Paper include "killer acquisitions" and the role of privacy in merger review, it is unclear at present whether the draft White Paper will lead to amendments to the merger control rules to specifically address the issues arising from digital mergers.
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stephenwu@leeandli.com www.leeandli.comOverview of Taiwan Merger Control
Merger control in Taiwan is regulated by the Taiwan Fair Trade Act (TFTA), and the competent authority is the Taiwan Fair Trade Commission (TFTC). The principle is that a filing with the TFTC would be required for a transaction that falls within the definition of a “combination” under the TFTA if any of the filing thresholds is met.
Types of combination
According to Article 10 of the TFTA, a "combination" is defined to include:
Filing thresholds
Under the TFTA, there are both a turnover filing threshold and a market share filing threshold:
Substantive test and review timeline
In terms of the substantive test, as prescribed under Article 13 of the TFTA, if the TFTC concludes, after considering all relevant factors, that the overall economic benefits of the merger outweigh the disadvantages resulting from competition restraint, clearance would be granted.
With respect to the timeline, if the TFTC does not make any objection to the filing within 30 working days following the filing date, the parties to the proposed transaction would be free to proceed with the merger. The TFTC may shorten the 30-day waiting period or extend the period by up to another 60 working days if it deems necessary.
It should be noted that the aforesaid filing date refers to the date on which the TFTC confirms that all required documents and information have been completed. To be specific, after receiving the initial filing, the TFTC may issue letter(s) of request for information (RFI) instructing the parties to provide supplemental information. Such RFI procedure will end if and when the TFTC is satisfied that the parties have submitted all required documents and information.
Recent Amendments to Improve Efficiency
In the past year, the TFTC has made a number of amendments to its merger control regulations in order to improve the efficiency of its merger reviews and the quality of its decisions.
Guidelines on the Provision of Pre-Filing Consultation Services (“Consultation Guidelines”)
In August 2021, the TFTC launched its pre-filing consultation services for enterprises to consult the TFTC before submitting their merger filings to the TFTC. The key points of the Consultation Guidelines are summarised below.
Who can request the consultation service?
This service is offered to participating parties who are planning to submit their merger filings to the TFTC. The request may be made by the participating parties on their own or through their agents with the proper power of attorney.
What is the scope of the consultation service?
Through the consultation service, the TFTC will assist the participating parties in clarifying questions such as whether the subject transaction has met the definition of a combination, whether any filing threshold has been reached, which entities should be named as the participating/notifying parties in the merger filing, what documents should be submitted for merger review and which type of procedure should apply for merger review.
How is the consultation service requested?
The consultation service may be requested via an enquiry in hard copy or via the service box at the TFTC's official website. In the request, the details of the matters that are in need of consultation must be provided, including the names of the participating parties, the products and/or services involved in the proposed transaction, the transaction structure, the markets that could potentially be affected by the transaction, the date on which the merger filing is expected to be submitted and the documents related to the transaction. Providing such information in full and in detail will ensure the efficiency and effectiveness of the consultation service.
What is the timeframe for utilising the consultation service, and is there any exception?
To ensure that the TFTC is adequately prepared to respond to the consultation, the consultation request should be made at least ten working days prior to the expected filing date. For complex merger cases, it is advisable to make the request earlier so as to enhance the effectiveness of the consultation service. On the other hand, if the participating parties submit their merger filing to the TFTC within ten working days of making the consultation request, the TFTC may cease the consultation service but directly proceed with the merger review procedure.
How will consultation enquiries be handled?
In addition to review of written documents, the TFTC may also elect to hold a meeting in person or via teleconference.
Is there a limit to the number of times the participating parties may request the consultation service?
Considering the limited time and resources the TFTC have for reviewing merger filings, in principle, participating parties may make only one consultation request for one merger filing.
What about confidentiality?
In view of the highly confidential nature of merger transactions, the Consultation Guidelines stipulate that the information and materials disclosed by the participating parties during the consultation process shall be kept confidential by the TFTC personnel involved in providing the consultation service.
Does the consultation have any binding effect?
The advice provided by the TFTC through the consultation service is for reference only and does not bind the TFTC's decision on the review of merger filings subsequently submitted by the participating parties.
Adoption of e-filing system
The TFTC announced its amendments to the Directions for Enterprises Filing for Merger (“Merger Directions”) in August 2021. One of the key changes is to adopt an e-filing system.
In the past, merger filings could only be submitted in hard copies. Now, under the Merger Directions, the TFTC will also accept submissions in electronic files – that is, the notifying parties may use the TFTC's Merger Notification and Concerted Action Application Online Filing System to submit their merger filings (including the supplemental filings during the RFI procedure). Nevertheless, the TFTC can still require the notifying parties to provide hard copies of their merger filings where it deems it necessary for its review and verification.
As the TFTC's merger review period is calculated based on working days, the Merger Directions stipulate that where a notifying party uploads the electronic files of its merger filing on a non-working day, such filing will be deemed officially received by the TFTC on the next working day after the files are uploaded to the TFTC's system by the notifying party.
Trend and Outlook
In the era of digital economy
To address the competition issues arising from the emergence of novel business models in the digital economy and the rise of technology giants, the Digital Economy Competition Policy Task Force at the TFTC started to draft the White Paper on Competition Policy in the Digital Economy in 2021; following several rounds of Task Force meetings and Commissioners' meetings, the TFTC finally released the draft White Paper on 2 March 2022. Among the topics discussed in the draft White Paper, the following two are related to merger control.
Killer acquisitions
The unresolved issue in this area is whether major digital technology giants’ acquisitions of potentially competitive start-ups constitute violations of the competition law. Thus far, the TFTC has no experience of handling so-called "killer acquisitions", even though it has dealt with conglomerate merger cases of technology giants and has accumulated law enforcement experience in examining merger cases from the perspective of “potential competition”. For future enforcement, the draft White Paper indicates that the TFTC will continue to monitor the international development trends and adjust relevant review standards and principles in a timely manner. Moreover, when dealing with the issues of killer acquisitions in the future, the TFTC should also consider the benefits arising from technological innovations.
Privacy in merger reviews
Another of the issues addressed in the draft White Paper is whether personal data protection is a parameter for assessing competition when reviewing the establishment of a new joint venture. Thus far, the TFTC has not included privacy protection in its analysis, but will start to consider how privacy protection can be internalised in a merger review from the perspective of “quality” competition. Nonetheless, according to the draft White Paper, if the TFTC wants to examine privacy issues in a merger filing case, it must first determine whether there is competition by the means of privacy protection, and such privacy issues should be considered only when the parties use privacy protection as a way to retain or attract users. In the context of protecting privacy and maintaining competition, the TFTC should consider not only the potential disadvantage of reduction in privacy protection after the merger, but also the potential disadvantage to competition that may result from enhancing privacy protection.
The draft White Paper also recognises the difficulty of quantifying the extent and necessity of privacy protection which can pose a challenge to law enforcement in terms of seeing privacy protection as a “competition on quality”. In the short term, the TFTC may seek the views of privacy and consumer protection authorities in order to apply the rule of reason test properly and to allow for a more comprehensive analysis in the context of merger reviews. In addition, the TFTC will continue to look at how other countries develop a more objective and even quantitative analysis, with a view to improve enforcement.
Proposed abolishment of the Guidelines on Handling Extraterritorial Combinations ("Extraterritorial Guidelines")
As of the date of this article, according to the Extraterritorial Guidelines, the TFTC will exercise its jurisdiction over a foreign-to-foreign combination only if the subject transaction will affect the Taiwanese market. Therefore, even though legally speaking it is the TFTC, not the parties to a transaction, that has the discretion to determine the local effect, in practice there may be some room for the parties to argue that a filing in Taiwan should not be required based on the lack of local effect.
However, according to the public notice posted by the TFTC on its website in early January 2022, the TFTC plans to abolish the Extraterritorial Guidelines and amend the Guidelines on Handling Combination Notifications ("Guidelines") by incorporating certain principles prescribed under the Extraterritorial Guidelines.
The TFTC stated in its notice that for an extraterritorial combination, since the TFTA clearly prescribes the thresholds triggering the filing requirements, it seems unnecessary for it to additionally determine whether or not to exercise its jurisdiction over an extraterritorial combination. Hence, the TFTC deems it appropriate to follow the practices of the competition agencies in the USA, the EU, Japan and Korea and to apply the “effect principle” when evaluating any “local effect” of a combination. Therefore, the Extraterritorial Guidelines should be abolished. Thereafter, for a combination without a significant local effect, the simplified filing procedure will apply, as stipulated under the amendments to the Guidelines.
According to the draft amendments to the Guidelines, the factors being considered by the TFTC in determining local effect are basically those set forth under the soon-to-be-abolished Extraterritorial Guidelines. As of now, there is no indication as to when the proposed amendment above will take effect.
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