COVID-19 NOTICE – TEMPORARY MODIFICATIONS OF PROCEDURES
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Select Topics
Relevant legislation and authorities
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  1. Is a merger control regulation in force?
  1. Which authorities enforce the merger control regulation?
  1. Relevant regulations and guidelines with links:
  1. Does general competition regulation apply to mergers or ancillary restrictions?
  1. May an authority order a split-up of a business irrespective of a merger?
  1. Other authorities that also require merger filing or may prohibit transaction
    (Note that this may not be an exhaustive list and that industry-specific legislation should always be considered. Furthermore, a merger will often require change of registrations with – but not approval from – the companies register, land register and authorities that have issued permits for the activities of the merging parties.)
  1. Are any parts of the territory exempted or covered by particular regulation?
Voluntary or mandatory filing
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  1. Is merger filing mandatory or voluntary?
Types of transactions to file – what constitutes a merger
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  1. Is there a general definition of transactions subject to merger control?
  1. Is "change of control" of a business required?
  1. How is "control" defined?
  1. Acquisition of a minority interest
  1. Joint ventures/joint control – which transactions constitute mergers?
Thresholds that decide whether a merger notification must be filed
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  1. Which thresholds decide whether a merger notification must be filed?
  1. Special thresholds for particular businesses
  1. Rules on calculation and geographical allocation of turnover
  1. Special rules on calculation of turnover for particular businesses
  1. Series of transactions that must be treated as one transaction
Exempted transactions and industries (no merger control even if thresholds ARE met)
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  1. Temporary change of control
  1. Special industries, owners or types of transactions
  1. Transactions involving only foreign businesses (foreign-to-foreign)
  1. No overlap of activities of the parties
  1. Other exemptions from notification duty even if thresholds ARE met?
Merger control even if thresholds are NOT met
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  1. May a merging party file voluntarily even if the thresholds are not exceeded?
  1. May the competition authority request a merger notification or oppose a transaction even if thresholds are not met?
Referral to and from other authorities
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  1. Referral within the jurisdiction
  1. Referral from another jurisdiction
  1. Referral to another jurisdiction
  1. May the merging parties request or oppose a referral decision?
Filing requirements and fees
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  1. Stage of transaction when notification must be filed
  1. Pre-notification consultations
  1. Special rules for acquisitions on stock exchanges and public takeover bids
  1. Forms available for completing a notification
  1. Languages that may be applied in notifications and communication
  1. Documents that must be supplied with notification
  1. Filing fees
Implementation of merger before approval – "gun jumping" and "carve out"
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  1. Is implementation of the merger before approval prohibited?
  1. May the parties get permission to implement before approval?
  1. Due diligence and other preparatory steps
  1. Veto rights before closing and “Ordinary course of business” clauses
  1. Implementation outside the jurisdiction before approval – "Carve out"
  1. Consequences of implementing without approval/permission
The process – phases and deadlines
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  1. Phases and deadlines
Assessment and remedies/decisions
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  1. Tests or criteria applied when a merger is assessed
  1. May any non-competition issues be considered?
  1. Special tests or criteria applicable for joint ventures
  1. Decisions and remedies/commitments available
Publicity and access to the file
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  1. How and when will details about the merger be published?
  1. Access to the file for the merging parties and third parties
Judicial review
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  1. Who can appeal and what may be appealed?

 
TAIWAN

Jennifer Lin
Equity Partner

JenniferLin@TsarTsai.com.tw

Tel: +886-2-2781-4111

Matt Liu
Equity Partner

MattLiu@TsarTsai.com.tw

Tel: +886-2-2781-4111

Vincent Wang
Equity Partner

VincentWang@TsarTsai.com.tw

Tel: +886-2-2781-4111

Yichu Chen
Associate Partner

YichuChen@TsarTsai.com.tw

Tel: +886-2-2781-4111

No new regulation adopted or proposed

Note that relevant regulations may be changed before your contemplated transaction is completed. Mergerfilers.com and our national experts keep information on regulations up to date and even provide alerts on adopted or proposed changes that have not come into force yet but may come into effect before the transaction is completed. When this field is green, we have no knowledge of such imminent changes to the relevant regulations.

Relevant legislation and authorities

1) Is a merger control regulation in force?

Yes. Merger control is regulated under the Taiwan Fair Trade Act (“TFTA”).

2) Which authorities enforce the merger control regulation?

The Taiwan Fair Trade Commission (“TFTC”) enforces the TFTA including the merger regulation contained therein. 

Generally speaking, decisions of the TFTC may be appealed to Taipei High Administrative Court. Decisions of the TFTC which involve intellectual property issues may be appealed to Taipei High Administrative Court or Intellectual Property Court.  Decisions of Taipei High Administrative Court and the Intellectual Property Court may be appealed to the Supreme Administrative Court.

3) Relevant regulations and guidelines with links:

The merger regulation is contained in the TFTA. More detailed rules may be found in various administrative rules and guidelines. Links to the relevant legislation, rules and guidelines are listed below:

Original Chinese version

English translation

公平交易法

The Taiwan Fair Trade Act

公平交易法施行細則

Enforcement Rules of Fair Trade Act

結合申報門檻規定於:

The thresholds for merger filings can be found as follows:

公平交易委員會對於相關市場界定之處理原則

TFTC Guidelines on Definition of Relevant Market

(No English translation provided)

事業結合申報須知

內有連結可下載中文版事業結合申報書 (公平交易委員會只接受中文版事業結合申報書)

Directions for Enterprises Filing for Merger 

The directions include a link to a filing form in English. (As stated in topic 33 only the Chinese language version may be used for filing.)

公平交易委員會對於結合申報案件之處理原則

TFTC Guidelines on Handling Merger Filings

公平交易委員會對於域外結合案件之處理原則

TFTC Guidelines on Extraterritorial Mergers

4) Does general competition regulation apply to mergers or ancillary restrictions?

Ancillary restrictions are not exempted from general competition scrutiny by the texts of either the TFTA or regulations promulgated by the TFTC. Neither is it practice of the TFTC to expressly clear ancillary restrictions together with mergers. It is thus unclear whether the ancillary nature of a restriction would be a valid defence against challenges based on general prohibitions on anti-competitive agreements. The general competition regulation applies to both mergers and ancillary restrictions, and the TFTC may review whether the ancillary restrictions are necessary and justifiable.

5) May an authority order a split-up of a business irrespective of a merger?

No. 

6) Other authorities that also require merger filing or may prohibit transaction
(Note that this may not be an exhaustive list and that industry-specific legislation should always be considered. Furthermore, a merger will often require change of registrations with – but not approval from – the companies register, land register and authorities that have issued permits for the activities of the merging parties.)

Telecommunication entities

An approval from the Ministry of Transportation and Communications is also required for a merger between telecommunication entities that install telecommunications line facilities and equipment for telecommunications services. 

Financial Institutions

An approval from the Financial Supervisory Commission is also required for a merger between financial institutions such as banks, insurance companies, financial holding companies, trust companies and securities and futures companies. 

7) Are any parts of the territory exempted or covered by particular regulation?

No. 

Voluntary or mandatory filing

8) Is merger filing mandatory or voluntary?

Merger filing is mandatory if any of the filing thresholds are met.

Types of transactions to file – what constitutes a merger

9) Is there a general definition of transactions subject to merger control?

Yes, according to the TFTA, a merger subject to merger control is defined as a transaction whereby:

  1. an entity and another entity are merged into one;
  2. an entity directly or indirectly acquires shares or capital contributions that results in said entity holding 1/3 or more of the shares or capital contributions  of another entity;
  3. an entity assumes or leases the whole or a major part of the business or assets of another entity;
  4. an entity jointly operates with another entity on a regular basis or is entrusted by another entity with the operation of its business on its behalf; or
  5. an entity directly or indirectly acquires control over the business operations or the employment and dismissal of the personnel of another entity.

10) Is "change of control" of a business required?

The TFTA does not require a “change of control” for all types of mergers. For instance, a transaction that results in a party holding 1/3 or more of the shares or capital contributions of another entity is considered a merger although there is no change of control.

11) How is “control” defined?

“Control” is not expressly defined under the TFTA, and is to be assessed on a case-by-case basis. According to a precedent of the Supreme Administrative Court, a majority on the board of directors does not necessarily amount to “control” for the purpose of merger regulation.

12) Acquisition of a minority interest

As stated under (2) in topic 9, a transaction that results in a party holding 1/3 or more of the shares or capital contributions of another entity is considered a merger subject to merger control, provided the thresholds in topic 14 are met.

13) Joint ventures/joint control – which transactions constitute mergers?

“Joint operation” is a type of merger (see (4) in topic 9 above).  According to the TFTC’s past decisions, joint venture falls under the definition of “joint operation”. 

Thresholds that decide whether a merger notification must be filed

14) Which thresholds decide whether a merger notification must be filed?

a) Turnover thresholds

A merger notification shall be filed if:

  1. During the immediately preceding fiscal year, a merging party’s local turnover exceeds NTD 15 billion and another party’s local turnover exceeds NTD 2 billion, provided however that if all the merging parties are financial institutions, notification is only required if one merging party’s local turnover exceeds NTD 30 billion and another party’s local turnover exceeds NTD 2 billion; or
  2. During the immediately preceding fiscal year, (i) all merging parties had an aggregate global turnover exceeding NTD 40 billion, and (ii) at least each of two of the merging parties’ local turnover exceeds NTD 2 billion. 

b) Market share thresholds

A merger notification shall be filed, irrespective of the turnover of the parties, if:

  1. A merging party’s local market share in any market (relevant or irrelevant to the proposed transaction) amounts to 1/4 or more; or
  2. The merging parties’ aggregated local market share in any market (relevant or irrelevant to the proposed transaction) amounts to 1/3 or more.

c) Value of transaction thresholds

N/A

d) Assets requirements

N/A

e) Other

N/A

15) Special thresholds for particular businesses

As mentioned in topic 14, a higher turnover threshold applies to a merger between financial institutions.

16) Rules on calculation and geographical allocation of turnover

When calculating the turnover of a merging party, the turnover of the ultimate parent and all its subsidiaries (not only the merging party) shall be included.  Besides, all sales to Taiwan customers shall be included in the calculation of local turnover regardless of whether destination of the products is in Taiwan or not.

17) Special rules on calculation of turnover for particular businesses

The turnover of the following businesses shall be calculated as below:

1. Bank: 

The “net income” disclosed in the statement of comprehensive income as defined in the Regulations Governing the Preparation of Financial Reports by Public Banks. 

2. Financial holding company: 

The “net income” disclosed in the statement of comprehensive income as defined in the Regulations Governing the Preparation of Financial Reports by Financial Holding Companies. 

3. Security firm: 

The “income” disclosed in the statement of comprehensive income as defined in the Regulations Governing the Preparation of Financial Reports by Securities Firms. 

4. Insurance company: 

The “total operating income” disclosed in the statement of comprehensive income as defined in the Regulations Governing the Preparation of Financial Reports by Insurance Enterprises.

18) Series of transactions that must be treated as one transaction

N/A

Exempted transactions and industries (no merger control even if thresholds ARE met)

19) Temporary change of control

N/A

20) Special industries, owners or types of transactions

N/A

21) Transactions involving only foreign businesses (foreign-to-foreign)

Regardless of the geographic dimension of the affected markets, mergers shall be notified to the TFTC if any of the thresholds are triggered. The TFTC may, subject to its discretion, decide not to exercise jurisdiction over an extraterritorial merger if the extraterritorial merger is unlikely to cause a direct, substantial and reasonably foreseeable impact on the Taiwan markets. 

22) No overlap of activities of the parties

N/A

23) Other exemptions from notification duty even if thresholds ARE met?

A transaction meeting the thresholds in question 14 will not be subject to merger control if:

  1. Any of the entities participating in a merger, or its wholly-owned subsidiary, already holds 50% or more of the voting shares or capital contributions of another entity participating in the merger and merges such other entity;
  2. Entities of which 50% or more of the voting shares or capital contributions are held by the same entity merge each other;
  3. An entity 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, solely to another entity newly established by the former entity;
  4. The redemption of shares by certain shareholders of an entity (pursuant to the Company Act or the Securities and Exchange Act) results in any remaining  shareholder(s) holding 1/3 or more of the outstanding shares of the entity; 
  5. A single entity establishes a subsidiary and holds 100% of the shares or capital contribution of such  subsidiary; or
  6. Any other circumstance designated by the TFTC.
Merger control even if thresholds are NOT met

24) May a merging party file voluntarily even if the thresholds are not exceeded?

No.

25) May the competition authority request a merger notification or oppose a transaction even if thresholds are not met?

No.

Referral to and from other authorities

26) Referral within the jurisdiction

N/A

27) Referral from another jurisdiction

N/A

28) Referral to another jurisdiction

N/A

29) May the merging parties request or oppose a referral decision?

N/A

Filing requirements and fees

30) Stage of transaction when notification must be filed

There is no specific deadline that a notification shall be filed within, but a merger that triggers any of the filing thresholds cannot be closed without the TFTC’s clearance.

31) Pre-notification consultations

There is no formal pre-notification consultation procedure, but informal and verbal pre-notification consultation is possible.

32) Special rules on timing of notification in case of public takeover bids and acquisitions on stock exchanges

N/A

33) Forms available for completing a notification

The TFTC provides forms in both traditional Chinese and English but the former is the only version to be filed with the TFTC.

34) Languages that may be applied in notifications and communication

Traditional Chinese only, and any documents attached to the notification form must come with a summary traditional Chinese translation.

35) Documents that must be supplied with notification

The following documents should always be supplied with a merger notification:

  1. The merging parties’ certificates of incorporation;
  2. Power of attorney for the lawyer representing the notifying party;
  3. For each merging party: the most recent annual report if the merging party’s stock is listed on the stock exchange or traded on over-the-counter markets; if not, the financial statement and operating report for the preceding fiscal year of the merging party;
  4. A list of the parties’ subsidiaries;
  5. All documents concerning the merger, such as the merger agreement;
  6. A list of the parties’ registered intellectual property rights;
  7. Group chart/overview for each of the parties to the merger showing the merging party’s parent company, subsidiaries and other subsidiaries of the merging party’s parent company; and
  8. An organization chart before and after the merger.

After filing, the TFTC may request additional information such as reports of market definition and market shares.

36) Filing fees

No.

Implementation of merger before approval – “gun jumping” and “carve out”

37) Is implementation of the merger before approval prohibited?

Yes.  The merging parties must be run separately and independently until the merger has been approved.

38) May the parties get permission to implement before approval?

No.

39) Due diligence and other preparatory steps

Due diligence must be conducted in a way that prevents competitively sensitive information from being used for purposes other than assessing the viability of the merger.

There are no guidelines on what may be considered acceptable preparatory steps.  

40) Veto rights before closing and "Ordinary course of business" clauses

An "ordinary courseof business" clause that prevents the target company from making decisions outside the course of its ordinary business until the closing date is generally considered acceptable.

However, it must be assessed on a case-by-case basis to what extent the parties may discuss – or provide each other with veto rights concerning – any decisions in their respective businesses.

41) Implementation outside the jurisdiction before approval – "Carve out"

There is no formal application procedure for “carve out”, but “carve out” may be granted by the TFTC on an exceptional basis if there are strong business justifications.

42) Consequences of implementing without approval/permission

The parties may be fined. The amount of the fine will be between NTD 200,000 and 50,000,000.

Furthermore, the merger may be prohibited and the TFTC may decide to prescribe a period of time for the parties to split, to dispose of all or a part of the shares, to transfer a part of the operations, or to remove certain persons from their positions, or make any other necessary dispositions (such as submitting a notification).

The process – phases and deadlines

43) Phases and deadlines

Phase

Duration/deadline

Pre-notification phase:

N/A

N/A

Assessment of completeness of notification:

When the merger notification has been formally submitted, the TFTC must assess whether the notification is complete. If the notification is deemed incomplete, the TFTC will issue RFI(s) requesting the merging parties to provide additional information that the TFTC deems necessary until all the requested information is provided. In practice, it normally take 1-3 months for the TFTC to actually declare a notification complete.  After all the information requested by the TFTC is provided, the TFTC will issue a letter confirming that the filing is completed on the day of the last submission.

Normally 1-3 months.

Phase I:

The merger is either approved or it is decided to initiate a phase II investigation of the merger if the merger is complex or raises anti-competitive concerns.

30 working days from the date when the notification was complete.

Phase II:

The merger is approved, approved with conditions, or prohibited.

The investigation is likely to involve detailed market surveys and economic analysis that may eliminate the concerns that the TFTC may have regarding anti-competitive effects of the merger. 

Up to 60 working days from the date when the phase II investigation was initiated.

Assessment and remedies/decisions

44) Tests or criteria applied when a merger is assessed

The TFTC will approve the merger if the advantages to the overall economy outweigh the disadvantages to the overall economy.

In a horizontal merger, the TFTC’s review will be focused on the following factors: (1) unilateral effects; (2) coordinated effects; (3) entry barriers; and (4) countervailing power of customers.

In a vertical merger, the TFTC’s review will be focused on the following factors: (1) competitors’ ability to choose trading counterparts after the merger; (2) impact on entry barriers for potential competitors to enter the relevant market; (3) likelihood that participating parties may abuse their market power through the merger; (4) likelihood that competitors may need to increase their operation costs in order to be competitive; (5) likelihood to form cartels; and (6) likelihood of market foreclosure.

In a conglomerate merger, the TFTC’s review will be focused on the following factors: (1) likelihood of change of legal landscape and the impact on the participating parties; (2) likelihood of cross-industry operation facilitated by technological innovation; and (3) whether participating parties have any original plan of cross-industry operation before the merger.

In the case where there are significant anti-competitive concerns, the parties may provide the following explanations for the TFTC’s assessment: (1) economic efficiency; (2) consumer welfare; (3) the fact that one of the merging parties is in a disadvantaged trading position; (4) the fact that one of the merging parties is an endangered entity; and (5) other benefits to the overall economy.

45) May any non-competition issues be considered?

Industrial policy sometimes may be taken into consideration by the TFTC when the proposed merger involves a key industry of Taiwan.

46) Special tests or criteria applicable for joint ventures

The assessment for joint ventures is the same as for other mergers, but if the joint venture involves coordination between the partners of the joint venture as object or effect, the TFTC will assess whether such coordination is ancillary to the merger or constitutes an anti-competitive agreement.

47) Decisions and remedies/commitments available

A merger may be approved, approved with conditions or prohibited.  Remedies can be either structural or behavioral, but the TFTC has historically only imposed behavioral remedies.

The TFTC may revoke an approval if at any time it becomes aware that incorrect or misleading information was provided by the parties or if the parties do not comply with the conditions of the approval.

If a merger is implemented without approval, the TFTC may prohibit the merger and order a separation of the businesses or any other measure capable of restoring competition (see topic 5).

Publicity and access to the file

48) How and when will details about the merger be published?

After filing, the TFTC may publish some basic information of a merger and invite public comment on a high-profile or complex merger.  For the mergers that attract high attention, during phase II, the TFTC may provide more details and invite the merging parties, third parties, other government agencies, professors, and government think tanks to attend a closed-door meeting to hear their comments on the merger.  Also, the TFTC may publish a press release on its decisions on high-profile or complex mergers.  If the TFTC prohibits a merger or approves a merger with conditions, it will publish a redacted version of the full decision.

49) Access to the file for the merging parties and third parties

The merging parties:

Yes.

Third parties:

No.

Judicial review

50) Who can appeal and what may be appealed?

The merging parties can generally appeal any decisions by the TFTC to the Taipei High Administrative Court or the Taipei District Court (see topic 2) including conditions contained in an approval decision.

Third parties may not appeal any merger decisions.


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