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Legality of Next
Media acquisition in question
By Shih Jun-ji, Flora Chang and Huang Kuo-chang 施俊吉、張錦華 黃國昌
The buyout of the Next Media Group has set off a wave of civic protests. Among
the buyers participating in the buyout, only the Formosa Plastics Group (FPG)
has filed a merger report because it obtained more than one-third of the Next
Media shares through an overseas subsidiary. The remaining buyers, including
Want Want Group, have not filed such a report.
Article 6 of the Fair Trade Act (公平交易法) defines the main components that
constitute a merger. In paragraph two of this article a merger is defined as the
acquisition of “more than one-third of the total voting shares or total capital”
of another enterprise. FPG clearly meets this criteria.
Paragraph four of the article adds that a “merger” also refers to a situation
“where an enterprise operates jointly with another enterprise on a regular basis
or is entrusted by another enterprise to operate the latter’s business.” This
means that even if some of the buyers participating in a merger do not acquire
more than one-third of the shares, they are still parties to the merger. The
other buyers involved in the Next Media Group takeover meet these requirements.
In handling the merger application by Hitachi and the five other companies who
joined together to buy One-Blue LLC in 2011, the Fair Trade Commission
determined that all the buyers were part of the merger in accordance with the
regulations in the aforementioned paragraph. This can be used as an example as
to why the other buyers of Next Media are also parties to the merger and are
legally required to submit a merger application.
According to Article 8 of the Enforcement Rules of the Fair Trade Act and the
commission, a merger report should be submitted jointly by all participants in a
merger.
According to a commission precedent, if a party does not submit the required
documents, the report is incomplete and fails to comply with the rules. The
commission will then set a time limit for submitting supplementary documents.
Documents submitted after the expiration of this time limit will not be accepted
by the commission.
Since FPG is the only buyer that has submitted a report in this case, and the
other buyers have not, the commission should request that they do so. If they
refuse to, the commission is required by law to return the merger application.
If the commission does return the application, that does not mean that the Next
Media case has been completed, instead it means that the merger application has
been rejected.
According to paragraph 3 in Article 11 of the Fair Trade Act, if a merger report
is not submitted when it should have been, the application is incomplete and the
merger cannot go ahead.
The commission should closely monitor the Next Media case. Should the buyers
proceed with the merger in violation of the law, an order prohibiting the merger
should be issued.
Shih Jun-ji is a research fellow at the Research Center for the Humanities
and Social Sciences at the Academia Sinica. Flora Chang is a professor at
National Taiwan University’s Graduate Institute of Journalism. Huang Kuo-chang
is an associate research fellow at the Institutum Iurisprudentiae of the
Academia Sinica.
Translated by Perry Svensson
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