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On March 30, 2011, the Fair Trade Commission of the Executive Yuan (FTC), pursuant to Article 12, Paragraph 2 of the Fair Trade Act, approved with conditions the application by Chunghwa Telecom, EasyCard, and 7-Elevan (together, the "Applicants") to jointly form a new marketing company (the "New Company") to operate their rewards program.
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The FTC made the following finding: (1) the Applicants face strong market competitions in their respective industries of telecommunications, convenience store chains, and micro-payment tools; (2) rewards programs can still be easily replaced by other marketing strategies because of the low rates of return to customers; and (3) there are no barriers of entry to the rewards program market. Based on these findings, the FTC determined that the risk of the combination resulting in competitive restraints in the Applicants’ respective industries is low. In addition, by combining the marketing functions of the Applicants, the New Company can generate economies of scale that will benefit the overall economy. Nevertheless, the FTC was aware of the possibility that, in the long run, the Applicants and other businesses that participate in the reward program in question (the "Participating Companies" or individually, a "Participating Company") may use the New Company as a platform to engage in various anticompetitive practices. Accordingly, to ensure that the overall economic benefit of the combination will outweigh the disadvantages of any potential competitive restraints, the FTC cleared the application with nine conditions, pursuant to Article 12, Paragraph 2 of the Fair Trade Act. The conditions are the following:
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The Applicants and the New Company may not cause a Participating Company to engage in conduct with the purpose of specifically injuring another business, such as refusing to sell to or buy from such business.
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The Applicants and the New Company may not improperly restrict the Participating Companies to enter into any exclusive dealings with the New Company.
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When the Applicants, the New Company, and the Participating Companies undertake joint marketing campaigns, they may not improperly restrict the consumers’ ability to choose individual products.
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The Applicants may not obtain from the New Company any market data or personal information of rewards program members.
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The New Company may not refuse without proper reason to join other business alliances that do not include the Applicants.
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The New Company may not discriminate against enterprises besides the Applicants in terms of the provision of reward program service, and may not charge improper management fees from such enterprises.
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One month before it begins to solicit membership, the New Company shall provide the FTC with its policies regarding the collection, handling, and use of the rewards program members’ personal information and publish such policies on the Internet prior to their implementation.
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One month before it begins to recruit Participating Companies, the New Company shall provide the FTC with its recruitment methods and publish such methods on the Internet prior to their implementation.
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Starting five years after its establishment, the New Company shall provide the FTC, by the end of each March, with the following information: changes in shareholder membership, business volume, number of members in the rewards program, the amount of rewards points exchanged and the exchange rate, the number and identity of Participating Companies, and new business operations not included in the application.
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