Taiwan's Merger Control on Extraterritorial Transactions
Taiwan's Fair Trade Commission ("FTC") has maintained its position on jurisdiction over an extraterritorial merger (that is, a foreign-to-foreign transaction) for quite a long time. For example, the Walt Disney Company acquiring entire shares of Twenty-First Century Fox, Inc. with USD 71 billion was required to be reviewed by the FTC in 2018. The FTC did play a role in this well known extraterritorial merger case. See also 104 Taiwan's Supreme Administrative Court Pan (判) No. 212 (2015) (affirming a judgment made on the basis of extraterritorial jurisdiction where the foreign enterprise sanctioned had no subsidiary nor branch office in Taiwan).
In short, foreign enterprise will have to file a merger notification to the FTC unless the extraterritorial merger is exempted from filing. Having said that, it does not mean any extraterritorial merger is required to file a merger notification to the FTC. The FTC will check whether the market shares of the enterprises involved and whether their sales amounts reach a certain threshold.
Two Key Criteria: Market Shares and Sales Amounts
A merger filing will be required when the merger falls within any of the following circumstances: "
(1) as a result of the merger the enterprise will have one third of the market share;
(2) one of the enterprises in the merger has one fourth of the market share; or
(3) sales for the preceding fiscal year of one of the enterprises in the merger exceeds the threshold amount publicly announced by the competent authority". See Section 1 of Article 11 of the Taiwanese Fair Trade Act.
In terms of the sales amount referred to above, a merger filing will be required when the merger falls within one of the following circumstances:"
(1) [t]he combined [worldwide] sales in the preceding fiscal year of the enterprises in the merger exceed [NTD] 40 billion and the domestic total sales of each of at least two of the enterprises in the merger in the preceding fiscal year also surpass [NTD] 2 billion.
(2) [t]he enterprises in the merger are not financial institutions and the domestic total sales of one of the merging parties in the preceding fiscal year exceed [NTD] 15 billion while the domestic total sales of one of the other merging parties in the preceding fiscal year also surpass [NTD] 2 billion.
(3) [t]he enterprises in the merger are financial institutions and the domestic total sales of one of the merging parties in the preceding fiscal year exceed [NTD] 30 billion while the domestic total sales of one of the other merging parties in the preceding fiscal year also surpass [NTD] 2 billion.” See Point 1 of the Thresholds and Calculation of Sales Amount Which Enterprises of a Merger Shall File with the Fair Trade Commission.
Exemptions for Merger Control
Foreign enterprises may expect to find a safe harbor under Taiwan's merger control to save their costs and legal fees for an extraterritorial merger. The good news is that a safe harbor does exist when the merger at issue falls into the scope of one of the exemptions under the "Merger Types to Which Paragraph 1 of Article 11 of the Fair Trade Act Does Not Apply" as announced by the FTC ("exemptions") on 29 March 2023.
The exemptions enumerate five types of mergers where merger filing will not be required.
1. An enterprise merges with other enterprises that are controlled by, controlling or affiliated with the former.
2. An enterprise merges with other enterprises, and the merging parties are controlled by the same enterprise.
3. An enterprise assigns a part of or the entire voting shares or capital contributions of a third-party enterprise that are in its possession to other enterprises that are controlled by, controlling or affiliated with the former.
4. An enterprise assigns a part of or the entire voting shares or capital contributions of a third-party enterprise that are in its possession to other enterprises, and the merging parties are controlled by the same enterprise.
5. Foreign enterprises merge by, outside the territory of Taiwan, jointly establishing or operating joint ventures that do not engage in economic activities within the territory of Taiwan.
For foreign enterprises seeking guidance on Taiwan's merger control, a tricky issue is what type of merger may constitute joint ventures so that foreign enterprises may take advantage of the exemptions. Unfortunately, the FTC has not formally defined "joint ventures" in the context of merger control. Therefore, the best strategy for foreign enterprises is to seek opinions of Taiwan's antitrust lawyers for assessing the legal risks involved.
