June 2023
Aaron Chen and Julian Lai
Uni-President Enterprises Corporation (hereinafter, “Uni-President”) and President Chain Store Corporation (hereinafter, “President Chain Store”), which previously held 40% shares of PresiCarre Corporation (hereinafter, “PresiCarre “), intended to jointly acquire the remaining 60% shares of PresiCarre. The Fair Trade Commission (hereinafter, the “FTC”) of Taiwan rendered the Gong-Jie-112001-FTC Approval Decision of May 8, 2023, which imposed certain obligation for not prohibiting the merger.
The FTC divided the relevant product market in this case into upstream and downstream product markets. The upstream product market was defined as the “dairy products market,” the “instant noodle market,” and the “non-alcoholic beverage market (excluding dairy and coffee products),” while the downstream product market was defined as the “hypermarket market” and the “online shopping market for daily necessities or consumables.” In addition, the geographical market was defined as the nationwide. The FTC held that Uni-President had the highest market share nationwide in the instant noodle, dairy products, and non-alcoholic beverage (excluding dairy and coffee products) markets, with shares of 36.16%, 29.3%, and 15.55%, respectively. PresiCarre, on the other hand, had a nationwide market share of 14.77% in the hypermarket market. Therefore, after the merger in this case is completed, there may give rise to anti-competitive concerns. The potential concerns encompassed PresiCarre leveraging its advantageous position in the distribution channel to promote its own brands or providing differential treatment to suppliers without justification. Additionally, the merger would result in escalation of PresiCarre’s bargaining power over upstream suppliers, which would be detrimental to competition in the downstream distribution market. However, based on the thorough assessment of overall economic benefits, the FTC concluded that the merger would stabilize the operation of PresiCarre, maintain its corporate culture, protect the rights and interests of employees and consumers, continuously enhance market competition and, help safeguard consumer rights through the benefits of vertical and diversified integration. Therefore, in order to ensure that the overall economic benefits of this merger outweighs the anti-competitive disadvantage, the FTC imposed certain obligation for not prohibiting the merger.[1]
It is worth mentioning that the current merger between Uni-President and PresiCarre is similar to the FTC’s July 15, 2022 merger case involving PX Mart and RT-Mart (the Gong-Jie-111001 FTC Approval Decision)[2] in the competitive market. However, there still exist some differences between the two cases in terms of their nature. For example, the Uni-President and PresiCarre case involves not only a horizontal merger and competition in the “hypermarket market” but also encompasses issues of vertical competition between Uni-President and PresiCarre in the “dairy market,” the “instant noodles market,” and the “non-alcoholic beverage market (excluding dairy and coffee).” The PX Mart and RT-Mart merger case does not involve vertical merger competition issues. However, the horizontal merger between them would result in a market share of 34.88% and 50.22% in the “hypermarket market” in the six major cities and non-major cities nationwide, thus creating a moderately to highly concentrated market. This may raise significant concerns about potential price increases. Additionally, Uni-President and PX Mart, the parties involved in these two cases, always adopt different operating and management policies; therefore, the commitments made by them during the pre-merger application to the FTC also differ. All aforementioned differences lead to different obligations imposed by the FTC. This article summarizes below the obligations imposed in the two cases for the reference and comparison of the readers.
| Merger Case Involving Uni-President and PresiCarre | Merger Case Involving PX Mart and RT-Mart | |
| Safeguard of consumer welfare | PX Mart and RT-Mart should thoroughly perform the commitments voluntarily made, including but not limited to not arbitrarily increase prices. However, this restriction does not apply for reasons not attributable to PX Mart and RT-Mart, such as price increases due to the change of the supplier’s cost structure, among others (Obligation 1). | |
| Within three years from the day after the implementation of the merger, PX Mart should maintain a consistent pricing policy nationwide (i.e., the same product should have the same price in urban and remote areas). However, they may further lower prices in specific areas based on competitive circumstances (Obligation 2). | ||
| Measures related to supplier protection | When Uni-President and other suppliers concurrently act as actual or potential suppliers to PresiCarre, PresiCarre should maintain arms-length transactions with Uni-President, and PresiCarre should not offer or promise commercial conditions (including but not limited to surcharges) to Uni-President that are obviously more favorable than those to suppliers in a similar position, or engage in discriminatory treatment without justification (Obligation 1). | |
| Within three years from the day after the implementation of the merger, PresiCarre should maintain the existing projects for small and medium-sized suppliers with an average monthly purchase amount of less than NT$1 million and ensure that any modifications or replacements to these projects do not result in any disadvantage to small and medium-sized suppliers as a whole (Obligation 2). | ||
| Within three years from the day after the implementation of the merger, PresiCarre should not terminate or delist any small and medium-sized suppliers from its list of suppliers without justification or reasonable notification. In case of termination or delisting, PresiCarre should provide reasons and allow the affected small and medium-sized suppliers to request a reconsideration by PresiCarre (Obligation 3). | ||
| Within three years from the day after the implementation of the merger, PresiCarre should not engage in joint negotiations, decision-making on transaction terms, and signing of annual supply contracts (hereinafter, the “Joint Procurements”) with individual suppliers together with President Chain Store. However, this restriction does not apply to cases where suppliers propose the Joint Procurements with PresiCarre and President Chain Store or cases not caused by PresiCarre or President Chain Store (Obligation 4). | ||
| From the day after the implementation of the merger, the enterprises to the merger shall not arbitrarily raise surcharges obtained from individual suppliers. However, this restriction does not apply to surcharge items arising from new services such as new promotion or advertising services adopted by suppliers and provided by the enterprises to the merger (Obligation 6). | From the day after the implementation of the merger, the enterprises to the merger should not arbitrarily increase surcharges obtained from individual suppliers. However, this restriction does not apply to surcharge items arising from new services such as new promotion or advertising services adopted by suppliers and provided by the enterprises to the merger (Obligation 3). | |
| From the day after the implementation of the merger, the clauses related to the most favored customers in the supply and sales agreement with PX Mart should be removed (Obligation 6). | ||
| Within three years from the day after the implementation of the merger, no slotting fees or new sponsorship fees may be charged from suppliers of the enterprises to the merger (Obligation 4). | ||
| Within three years from the day after the implementation of the merger, the annual supply and distribution system should not be changed more unfavorably. However, this restriction does not apply to changes made based on reasonable business considerations, with the consent of suppliers, or in pursuit of consumer welfare (Obligation 7). | Within three years from the date after the implementation of the merger, the annual supply and distribution system should not be changed more unfavorably. In case of surcharge items arising from new services, suppliers should be allowed to freely choose and decide if such services are to be used and their prior consent should be obtained (Obligation 5). | |
| Miscellanies | Within three years from the day after the implementation of the merger, up to 30% of the total number of PresiCarre’s voting shares may be held or obtained by President Chain Store; The board of directors in PresiCarre shall maintain a composition where no more than one-third of the seats are occupied by directors or the general manager from President Chain Store; and PresiCarre’s general managers and managerial officers should not serve as the general managers or managerial officers of President Chain Store two years before or during their employment (Obligation 5). | |
| Regular reports: | Within three years from the implementation of the merger, a report showing that the performance of the Obligations and overall economic benefits resulted from the merger shall be submitted to the FTC for reference by June 1 of each year (Obligation 8). | Within three years from the implementation of the merger, a report showing that the performance of the Obligations and overall economic benefits resulted from the merger shall be submitted to the FTC for reference by December 31 of each year (Obligation 7). |
[1] Please refer to the Gong-Jie-112001 Approval Decision of the Fair Trade Commission for complete details.
[2] For details, please refer to the new legal knowledge article of Lee, Tsai & Partners and titled The TFTC Conditionally Approved of the Merger Between PX Mart and RT-Mart, September 9, 2022.
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