August 2023
Aaron Chen and Julian Lai
Far EasTone Telecommunications Co., Ltd. (hereinafter, “Far EasTone”) plans to acquire Asia-Pacific Telecom Co., Ltd. (hereinafter, “APT”). On July 21, 2023, the Taiwan Fair Trade Commission (hereinafter, the “FTC”) issued the Gong-Jie-112002 Decision of July 21, 2023, granting approval for the merger while attaching specific obligations.
I. Summary of the decision
The FTC defined the relevant product markets as the “fixed communications network service market” and the “mobile broadband service market,” with the geographic market defined as the nationwide market. The FTC believed that in the fixed communications network service market, the market leader is Chunghwa Telecom Co., Ltd. with a market share of 85.26%. Thus, the merger would only have minimal impact on the structure of the fixed communications network service market and lacks significant unilateral or coordinated effects. However, in the mobile broadband service market, Far EasTone ranks second with a market share of 25.93%, while APT ranks fifth with a market share of 6.87%. This indicates a highly concentrated market structure. As a result, the merger may raise concerns about restricting competition in the mobile broadband service market, including the possibility of unilateral price increases or coordinated behaviors with other operators. However, the FTC believed that the merger would contribute to the development of 5G application services and reduce redundancy in core network construction, thereby enhancing machinery and electricity utilization efficiency. Additionally, APT has suffered ongoing losses over the years, leading to operational difficulties and its operating state in the past cannot be restored. As compared with the potential adverse effects on subscriber rights as a result of APT’s inability to sustain its operations due to losses, allowing the merger between Far EasTone and APT is likely to provide greater overall economic benefits. Therefore, to ensure that the overall economic benefits of the merger outweigh the potential anti-competitive disadvantages, the FTC imposed the following conditions for not prohibiting the merger:[1]
1. Tariff scheme
(a) Generally undertake existing subscriber contracts of APT, ensuring that subscribers can enjoy the tariff, content, and conditions specified in the contracts until December 31, 2025.
(b) Provide preferential tariff schemes for at least 5 years to disabled individuals, low and middle-income households, low-income households, financially disadvantaged students, and individuals over 65.
(C) Provide a preferential tariff scheme for at least one year to general subscribers.
(d) The implementation of the above-mentioned tariff schemes should be reported to the FTC for reference every year within 5 years after the combination.
2. Service and network quality enhancement
Far EasTone commits to enhancing service and network quality and hardware and software investments. The FTC also requires the annual submission, for five years after the merger, of a report detailing the concrete results from the implementation of improvements to network performance and service quality such as mobile broadband network integration and optimization, and an annual report showing Far EasTone’s fulfillment of its commitment that the merger brings overall economic benefits.
3. Promotion of market competition
The FTC requires Far EasTone to provide mobile voice and data services, roaming services, number portability services, and equal access services at the same level as those provided to its own subscribers. Far EasTone is not allowed to refuse or suspend the provision of wholesale services without justifications, set obviously unreasonable prices or transaction terms, provide wholesale services with discriminatory prices or transaction terms without justifications, or transact with another telecom enterprise on condition that it can only transact with Far EasTone.
II. Brief comments
On February 25, 2022, Far EasTone and APT respectively approved the merger proposal at their respective board meetings. The provisional merger effective date was set for September 30, 2022, and it was agreed that if the merger is not approved by the competent authority by December 31, 2022, either party could extend the deadline to March 31, 2023. Later on December 30, 2022, the parties released an addendum to the merger contract, extending the merger deadline to April 30, 2023, and either party may further extend the deadline to June 30, 2023. However, it was not until July 21, 2023 that the FTC rendered the decision to attach conditions without prohibiting the merger. The timeline for reviewing the merger decision by the FTC is counted from the date of acceptance of “complete filing materials,” which, depending on the need in individual cases, may lead to a situation that the actual review period becomes much more than the 90 business days (see Paragraphs 7 and 8 of the Fair Trade Act). Therefore, it is crucial for the merging parties to adequately assess in advance the required time for the authority’s merger review. From the legislation perspective, it may need to consider how to balance the time-sensitive nature required by the merging parties and the time needed for the authority to conduct the merger review to protect the competition.
[1] For the complete content, please refer to the Gong-Jie-112002 Decision of the Fair Trade Commission
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