2.Do all the mergers and acquisitions between enterprises need to file a pre-merger notification to the FTC?

A2:

1.Not all the mergers and acquisitions between enterprises need to file a pre-merger notification to the FTC. Only the merger that falls within any of the following circumstances described in Article 11(1) of the Fair Trade Act shall be filed with the competent authority in advance:

A.as a result of the merger the enterprise(s) will have one third of the market share;
B.one of the enterprises in the merger has one fourth of the market share; or
C.sales for the preceding fiscal year of one of the enterprises in the merger exceeds the threshold amount publicly announced by the competent authority.

Articles 11(1)(i) and 11(1)(ii) of the Fair Trade Act employ market share as the basis for the determination as to whether a filing is required for a merger of enterprises. However, in certain mergers, either horizontal or vertical, the calculation of market share of products of the individual enterprise may not meet the requirements set forth in the two subparagraphs cited above, yet post-merger restrictive influence on market competition may still appear due to an increase in market influence. Therefore, Article 11(1)(iii) further adds annual sales revenue as an additional criterion, and authorizes the Fair Trade Commission, the competent authorities, to set standards according to prevailing economic conditions.

2.The Fair Trade Commission is now in favor of a dual threshold system (of higher and lower amounts for the respective merging companies), and also set separate standards for financial enterprises and non-financial enterprises, and the following standards are announced and take effect on 2nd December, 2016：

A.Under one of the following circumstances, business mergers shall be filed with the FTC in advance:

i.The combined worldwide sales in the preceding fiscal year of the enterprises in the merger exceed NT$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 NT$2 billion.
ii.The 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 NT$15 billion while the domestic total sales of one of the other merging parties in the preceding fiscal year also surpass NT$2 billion.
iii.The enterprises in the merger are financial institutions and the domestic total sales of one of the merging parties in the preceding fiscal year exceed NT$30 billion while the domestic total sales of one of the other merging parties in the preceding fiscal year also surpass NT$2 billion.

B.The threshold amount of the sales for non-financial institutions shall apply to mergers composed of both financial institutions and non-financial institutions.

C.The term "financial institutions" used in this announcement refers to the financial institutions specified in Article 4 of the Financial Institutions Merger Act, as well as financial holding companies as described in Article 4 of the Financial Holding Company Act.

D.The sales of banks are determined in accordance with the net income indicated in the consolidated income statement established pursuant to the Regulations Governing the Preparation of Financial Reports by Public Banks. The sales of financial holding companies are determined in accordance with the net income indicated in the consolidated income statement established pursuant to the Regulations Governing the Preparation of Financial Reports by Financial Holding Companies. The sales of securities firms are determined in accordance with the income indicated in the consolidated income statement established pursuant to the Regulations Governing the Preparation of Financial Reports by Securities Firms. The sales of insurance companies are determined in accordance with the operating revenue indicated in the consolidated income statement established pursuant to the Regulations Governing the Preparation of Financial Reports by Insurance Companies.

E.The "sales for the preceding fiscal year " as set forth in Subparagraph 3 of Paragraph 1 of Article 11 of the Fair Trade Act are calculated in accordance with the following:
i.In the case that merging enterprises have operated for a whole year in the preceding fiscal year, the sales for the fiscal year shall be adopted to calculate the amount.
ii.In the case that merging enterprises have operated for less than a year in the preceding fiscal year, the sales accumulated in the months of actual operation shall be calculated proportionately to determine the amount. The sales for the preceding fiscal year ＝ (sales throughout the actual period of operation ÷ the number of months of actual operation) × 12

3.Where the merger of two or more enterprises meets any one of the requirements set forth in Article 11(1) of this Act, application for such merger shall be filed in advance with the Commission for approval regardless of whether a parent company-subsidiary relationship exists. According to the provisions of Article 12 of the Fair Trade Act, the enterprises fall within any of the following circumstances shall not be filed with the Commission:

A.Where any of the enterprises participating in a merger, or its 100% held subsidiary, already holds no less than 50% of the voting shares or capital contribution of another enterprise in the merger and merges such other enterprise.

B.Where enterprises of which 50% or more of the voting shares or capital contribution are held by the same enterprise merge.

C.Where an enterprise assigns all or a principal part of its business or assets, or all or part of any part of its business that could be separately operated, to another enterprise newly established by the former enterprise solely.

D.Where an enterprise, pursuant to the proviso of Article 167, Paragraph 1 of the Company Act or Article 28-2 of the Securities and Exchange Act, redeems its shares held by shareholders so that its original shareholders’ shareholding falls within the circumstances provided for in Article 10, Paragraph 1, Subparagraph 2 herein.

E.Where a single enterprise reinvests to establish a subsidiary and holds 100% shares or capital contribution of such a subsidiary.

F.Any other designated type of merger promulgated by the competent authority.

Whether the enterprises need to file to the Fair Trade Commission for approval as a subsidiary merges with its parent company, it should still be determined on a case-by-case basis.
 

Relevant article(s) of law: Fair Trade Act, Articles 11, and 12