Newsletter
THE FTC IMPOSED SANCTION ON TWO KTV COMPANIES FOR VIOLATION OF PRE-COMBINATION FILING
In a decision dated March 24, 2010, the Fair Trade Commission (FTC) determined that Cashbox Party World Ltd. ("Cashbox") and Holiday KTV Ltd. ("Holiday"), two KTV companies, had violated the Fair Trade Act (FTA) owing to failure to file a pre-combination notification with the FTC for their regular joint operations, and because of Cashbox's directly or indirectly controlling the business op-erations and the hiring and discharge of Holiday's personnel. Consequently, the FTC ordered the two companies to take proper corrective action within three months, and imposed a NT$3 million fine on Cashbox and a NT$1.5 million fine on Holiday.
The FTC found that Cashbox and Holiday filed a pre-combination notification previously for the merger between the two companies. Such combination was prohibited by the FTC because the dis-advantages from the restrictions placed on competition would outweigh the overall economic benefits. However, Cashbox and Holiday were reported to have proceeded with the combination illegally. Cashbox and Holiday, through two subsidiaries jointly invested in by them, operated customer service centers and conducted computer/audio-visual information business together. Holiday also appointed Cashbox to manage the Lisen North Road branch of its KTV chain by a commission contract. Moreover, Holiday rented an office from Cashbox to be used as its chairman's office. Such acts are all proof of joint operation, which meets the definition of combination under the FTA. In addition, when Holiday elected new directors in 2007, one director's seat and two supervisor's seats in Holiday were taken by the representatives of Cashbox subsidiaries, and one Cashbox director was elected as chairman of Holiday. Furthermore, the chairman of Cashbox, who is the representative of Absolute Perfect Co., Ltd., controls one corporate director of Holiday. That is to say, Cashbox controls three out of the total five directors and two out of the total two supervisors in Holiday. Additionally, one of the directors serving as the representative of Cashbox is also the CEO of Holiday. Conse-quently, Cashbox can indirectly or directly control the business operations or the hiring and discharge of the personnel of Holiday, which meets the definition of combination under the FTA.
According to the FTC, the regular and joint operations of Cashbox and Holiday as well as the indirect or direct control by Cashbox over Holiday meet the definition of combination under the FTA, and the two companies' failure to file a pre-combination notification with the FTC is in violation of the FTA. Thus, the FTA ordered the two companies to correct such violation and imposed a NT$3 million fine on Cashbox and a NT$1.5 million fine on Holiday.