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On March 11, the Executive Yuan Fair Trade Commission (FTC), pursuant to Article 12 of the Fair Trade Act, allowed the extraterritorial combination of Microsoft Corporation and Yahoo! Inc. with certain conditions.
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The combination will involve transitioning Yahoo!'s core search technology, search engine, and keyword advertising platform to Microsoft. Yahoo! will become the exclusive sales force for both companies' premium search advertisers. Microsoft will be Yahoo!'s exclusive search utility provider. The FTC asserted jurisdiction because the transaction fell within the definition of "combination" under Article 6, Paragraph 1, Item 4 of the Fair Trade Act. Moreover, the Taiwan subsidiaries of both companies reported last year more than NT$4.5 billion in revenue. The combination of these two companies will have a direct, substantial, and reasonably foreseeable impact on Taiwan's economy, and should therefore be regulated. Yahoo! also has more than 25% market share in both internet ad-vertising and keyword advertising in Taiwan. This triggers a filing requirement with the FTC.
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The FTC noted that after the combination, the number of keyword advertising platforms in Taiwan will remain unchanged. In addition, even though Microsoft will become Yahoo!'s exclusive search utility provider, the two companies will continue to compete in keyword advertising and the operation of internet portals based on the revenue sharing mechanisms in the coordination agreement. The FTC will therefore not block the combination. It will, however, impose conditions pursuant to its authority under Article 12, Paragraph 2 of the Fair Trade Act. These conditions will account for Taiwan's market conditions, maintain fair competition, and ensure that the economic benefits from this combination will be greater than the disadvantage resulting from competition restraints. The conditions are the following:
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Microsoft and Yahoo! shall not use their improved market power to prevent their keyword adver-tising counterparties from transacting with other companies.
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Microsoft and Yahoo! shall not engage in unfair trade practices in dealing with their counterparties or require any contract provisions that will have the effect of restraining competition.
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Microsoft and Yahoo! shall not improperly set, maintain or change prices.
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Microsoft and Yahoo! shall not unfairly prevent other companies from competing or otherwise abuse their market power.
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At the end of December in each of the three years following the combination, Microsoft and Yahoo! shall provide the FTC with information on the structure of the keyword advertising business, in-cluding the size of the market, the number of people employed in Taiwan, and market share data.
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