Whether foreign companies were required to make a merger control filing with the Taiwan Fair Trade Commission (“TFTC”) in respect of extraterritorial mergers was previously a bit of a gray area. Arguably, if the transaction participants did not meet the filing thresholds set out in Fair Trade Act, a merger filing was not required. Additionally, the TFTC published Disposal Directions (Guidelines) on Extraterritorial Mergers (the “Extraterritorial Merger Guidelines”) which set forth criteria, which if met, would likely result in the TFTC waiving jurisdiction over an extraterritorial merger transaction. This combination of regulations and guidelines led some extraterritorial merger participants to forgo merger control filings in Taiwan if they felt they could make reasonably cogent arguments that their transactions were not subject to regulation in Taiwan and/or the TFTC would likely waive its jurisdiction over the transaction. However, there always remained the risk that the TFTC would take a different view of (a) the defined market and thus whether filing thresholds had been met and (b) whether to waive its jurisdiction over the extraterritorial transaction.
With the TFTC’s abandonment of the Extraterritorial Merger Guidelines and its related amendment of the Disposal Directions (Guidelines) on Handling Merger Filings (the “Merger Filing Guidelines”), this gray area has been clarified, but not altogether eliminated. With these recent regulatory changes, the TFTC has signaled it is increasingly interested in reviewing extraterritorial mergers, even transactions which would not have an obvious domestic effect on the Taiwan market.
Under these new circumstances, extraterritorial merger transaction participants would be advised to make merger control filings in Taiwan if there is any plausible argument that the proposed transaction meets relevant filing thresholds. (For a discussion of these thresholds, please see our related article here.)
If filing in Taiwan is required in respect of an extraterritorial merger, the TFTC may allow the participants to use the simplified filing procedures pursuant to the amended Merger Filing Guidelines. Pursuant to the amended Merger Filing Guidelines, if the proposed merger meets one of the criteria listed below, the simplified procedures may be used:
- the total consideration for the extraterritorial merger is less than TWD2.5 billion (c. USD 80.7 million); or
- the requirement to file is due to one of the parties having a 1/4 relevant market share and one of the following conditions is met:
(1) in the case of a horizontal merger, the total revenue in Taiwan for the products or services provided by the foreign transaction participants is less than TWD 200 million (c. USD 6.5 million),
(2) in the case of a vertical merger, the revenue in Taiwan for the products or services provided by the foreign transaction participants is less than TWD 200 million (c. USD 6.5 million), or
(3) the counterparty had no Taiwan revenue in the preceding financial year.
Also of note in the recent amendments is the addition of an exception allowing foreign entities establishing or operating a joint venture to avoid making a merger filing in Taiwan provided that the joint venture would not conduct economic activities here.
While the TFTC, by these amended guidelines, appears to be taking a heightened interest in extraterritorial merger transactions, we are interested to see how these amendments are applied in practice. As we have mentioned in past related articles, there is no public record of the TFTC ever having taken enforcement action against a foreign entity for failure to make a required merger filing in Taiwan. We will continue to monitor this space and post updates of any significant related rulings by the TFTC.Gregory A. Buxton, Ming Teng.