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The Fair Trade Commission (FTC) used to take the view in an early ruling that the Fair Trade Law (FTL) regulates only combinations between existing entities, and should not apply to cases where entities jointly invest in a new entity.
However, because the ruling restricts the scope of the FTL control over business combinations, it has attracted much criticism ever since it was announced. On 20 August the FTC announced that the ruling would cease to have effect from 20 August, for the following reasons:
Legislation in other countries generally in-cludes newly established enterprises within the scope of regulatory control over business combinations;
The ruling created a risk of the regulatory mechanism placing excessive emphasis on actions and insufficient emphasis on struc-tures;
The main legislative intent of the control on business combinations under the FTL is to prevent the undesirable effects of the forma-tion of monopolies and the excessive concen-tration of market power. Therefore, regardless of whether an enterprise invests in an existing or newly formed enterprise, if the result of the combination is to lead to a market monopoly, such as to affect the orderly conduct of trade, there is a need for regulatory control;
When the FTC delivered the ruling in the early period of its operation, the major considera-tions were the high cost of controls over business combinations, and the need to avoid increasing the operating costs of business en-tities participating in combinations. However, on 6 February 2002 the FTL control regime was overhauled to adopt a filing system with the opportunity for objection by the regulator, and a higher dual threshold for filing was in-troduced. Thus the concerns regarding ad-ministrative costs and increased operating costs for participating enterprises have been resolved; and
The FTC already reviews the new establish-ment of financial holding companies.
The FTC also stated that regardless of whether an enterprise invests in an existing enterprise or a new enterprise, there is no difference in the pos-sible effects of restricting competition in the market in which the enterprise operates. There-fore, the FTL should not only impose regulatory control on an enterprise that exists prior to the time of a combination, but should also apply to a newly established enterprise. In other words, when two or more enterprises jointly invest in the establishment of a new enterprise, if the conditions for filing under Article 11 Paragraph 1 of the FTL are met, they should report the combination to the FTC.
