How to Weigh the Overall Economic Benefit in Company Mergers of Taiwan?
Paragraph 1 of Article 13 of Fair Trade Act stipulated that "the competent authority may not prohibit any of mergers filed if the overall economic benefit of the merger outweighs the disadvantages resulted from competition restraint." The approval of the mergers case is based on Fair Trade Act, its scrutiny focused on "disadvantages of restraints of competition" and "overall economic benefit" these two parts to weigh the pros and the cons. It's like putting two parts on the opposite side of the balance, if "overall economic benefit" outweighs the "disadvantages of restraints of competition", then Fair Trade Commission can't restrict the merger.
In a high profile case, Ubereats merger foodpanda, the current discussion is more focused on the "disadvantages of restraints of competition", the "overall economic benefit" part does not draw much attention. But the "overall economic benefit" still has important influence in the scrutiny of the major merger case. For example, the issue of synergy, economic benefits and so on are fall in the "overall economic benefit" field in law. Therefore, the following will discuss separately on the "overall economic benefit" section and its importance in the merger scrutiny from procedure aspect and substantial aspect, we will also discuss the related issue of the balance between "disadvantages of restraints of competition" and "overall economic benefit".
Discover the important influence of the overall economic benefit in major merger case from procedure aspect
The procedure of the Fair Trade Commission scrutinize merger case can divided into two categories, simplify operating procedure and general operating procedure, the crucial part is whether the "overall economic benefit" is the focus of the scrutiny. Article 6 of Merger Guidelines, issued by Fair Trade Commission, stipulates that when the merger case adopting simplify operating procedure to scrutinize, the Fair Trade Commission is able to consider that the overall economic benefit of merger outweighs the disadvantages of restraints of competition；if the case that adopts general operating procedure has significant restrictive competition concern, then it will need to take a step ahead to measure the overall economic benefit, and to evaluate if the overall economic benefit of mergers outweighs the disadvantages of restraints of competition. Based on above regulation, we can see that in general and less influential merger case, the "overall economic benefit" is not the focus of the scrutiny；but in the major merger case, especially the one which "has significant restrictive competition concern", the balance of the "overall economic benefit" is the essential element in the procedure.
But how dose the Fair Trade Commission define which merger "has significant restrictive competition concern"? Article 10 of Merger Guidelines has stipulation on this issue, it's stipulation focus on deciding certain market share standard, if the following market share condition occur, then the Fair Trade Commission shall consider it has significant restrictive competition concern in principle:
The total market share of companies that engaged in merger reach half of market share.
The market share of top two companies in relevant market reach two thirds.
The market share of top three companies in relevant market reach three quarters.
We can notice that in regulation above, there are two conditions, the total market share of companies engaging in merger reach half of market share and the market share of top two companies in relevant market reach two thirds, if Ubereats and foodpanda reach the above standard in the Fair Trade Commission estimate information of the market share and define the relevant market, then in accordance with stipulation above, the Fair Trade Commission shall consider this case "has significant restrictive competition concern". It's worth emphasizing that having "significant restrictive competition concern" does not directly equal to "merger prohibit", it is a concept that will easily be misunderstood and misused in the discussion. Therefore, the legal effect of "significant restrictive competition concern" is that "need to further balance overall economic benefit", the regulation especially shows the important influence of the overall economic benefit in major merger case.
Discover the concept of overall economic benefit and the proof of economic efficiency from substantial aspect
Next step, we must check the concept of "overall economic benefit", and the issue on how it will be considered.
Article 13 of Merger Guidelines stipulates that "the merger filed case which has significant restrictive competition concern, the filed company can offer the following overall economic benefit factors to help the Fair Trade Commission scrutiny:
Economic efficiency.
Consumer benefit.
Company that engaged in merger was a weaker party.
One of the companies that engaged in merger is a danger company.
Other specific result related to overall economic benefit".
From the regulation above, we can see that the specific element of "overall economic benefit" include above regulation. In practical operating, it will need the filed company actively offer those factors to the Fair Trade Commission.
Due to the above two elements, element 3 and 4, are not meet the situation of Ubereats and foodpanda, therefore, in this case, the worth considering overall economic benefit element are "economic efficiency", "consumer benefit" and "other specific result related to overall economic benefit" these three elements. Based on the past horizontal merger practical case, "economic efficiency" can approximately divide into "management efficiency" and "production efficiency" two types:
"Management efficiency" means that a company can integrate internal resources due to horizontal merger, and reduce overlap expense, so as to manage efficiently and reduce the cost.
"Production efficiency" means that a company expand business scale due to horizontal merger, and so as to reduce production cost.
The filed company can analyze their self operating production and sales information, then offer these two economic efficiencies information to the Fair Trade Commission. The thing that worth noting is that the Merger Guidelines further stipulates that economic efficiency shall meet the following conditions:
It can be proof that economic efficiency can achieve in short-term.
It cannot achieve through other means but merger.
It can reflect to consumers benefit.
The regulation above is important because it reminds file companies that they shall take a crucial step, it's "prove". If we take balance for example, then every economic efficiency element can see as a weight, but whether a weight is qualified to be put on the "overall economic benefit" weighing pan in the balance, the crucial judgement is in the "prove". If the weight is prove to meet the above conditions, then it shall be qualified to put on the balance.
The balance between "disadvantages of restraints of competition" and "overall economic benefit”
After putting the weight on the balance, then here comes to specific weight, it's the balance issue between "disadvantages of restraints of competition" and "overall economic benefit", and that means how competent authority take comprehensive balance measure when dealing with merger case. In practical, this balance measure has dynamic quality, and it's stipulated in Article 14 of Mergers Guidelines "the Fair Trade Commission can inform companies that engaged in merger that there's probable competition concern before making merger decision, and consult companies that engaged in merger that if they can offer a constructed aspect measure or an action aspect measure that enough to dissolve competition concern." This regulation is crucial to the balance between "disadvantages of restraints of competition" and "overall economic benefit", and its importance shown in the following two aspects.
The first aspect is that the regulation fully shows the fundamental difference between merger scrutiny and other orders that Fair Trade Commission have. Other kinds of order that Fair Trade Commission have, for example, the punishment on concerted action and misleading advertisement and so on, their judgement on these order are all based on "the fact that has happened", the difference in scrutiny merger case is that the Fair Trade Commission has to predict "the future situation that has not happened", and the prediction cannot just based on the fact that has happened, it has to include "the fact that is happening" and "the fact that might be fulfilled in the future".
Therefore, the fundamental of balancing "disadvantages of restraints of competition" and "overall economic benefit" is not static, facing the past and based on the fixed fact, it's dynamic, facing the future and based on the changing fact.
The second aspect is that the regulation reminds the filed company that they need to take another critical step: "commitment". The merger company can offer many future commitments in the scrutiny procedure, and the Fair Trade Commission will take it into the evaluation of the merger scrutiny. If the commitment being taken by the Fair Trade Commission, there is a chance to transform to an additional term, and present on the written decision of the Fair Trade Commission. Company commitment can approximately divide in the two aspects, in "disadvantages of restraints of competition" aspect, the content of the commitment is mainly on eliminate competent authority's competition concern, and in "overall economic benefit" aspect, the content of the commitment is mainly on promote overall economic well-being.
The filed company can actively offer the commitment on "overall economic benefit" to the Fair Trade Commission. Take delivery platform for example, the fee of delivery or shipping is non-transparent, and it has been criticized by all circles, it means that the company does not disclose the information about calculation method behind the price to the courier and consumer. This seems like it is using artificial intelligence to do the calculation, therefore, it causes the calculation method cannot be disclosed. If so, in the seven principles of the Artificial Intelligence Fundamental Act in Taiwan, "transparency and interpretability" are the material principal, it asks companies to do adequate information disclose or mark, if it was produced by artificial intelligence, therefore, "information disclose" will obviously be the important trend of the future. If the filed company make a commitment by taking it as a future "develop and innovative" way, then it can be taken into the consideration of "overall economic benefit" aspect.
