Newsletter
CHANGES IN ASSET TRANSFER REVIEW CRITERIA
Article 6, Paragraph 1, Item 3 of the Fair Trade Law defines a situation in which the whole or a major part of the business or property of an enterprise is assigned or leased to another enterprise, as one form of business combination. But the FTL does not clearly define what is meant by the whole or a major part of the business or property. Hence when a company in Taiwan sells part of its own assets or purchases part of the asserts of another business, it usually applies with the Fair Trade Commission (FTC) for combination approval if its market share is large or the value of either party's yearly sales revenue exceeds NT$5 billion. In practice, even where a transaction does not involve the transfer of the whole or a major part of the business or property, the FTC would not dismiss the application as unnecessary, but would perform an initial review and grant its approval.
The FTC now intends to make substantive review on whether an asset transfer between enterprises requires regulatory approval. The FTC's regulatory review team recently suggested applying the test of whether the transfer of assets would lead to concentration of economic power of an enterprise such as to restrict market competition to determine whether the assets concerned constitute the whole or a major part of an enterprise's assets, and on this basis to decide whether the case requires FTC approval. According to the proposed new rule, if an asset has the capacity for independent, autonomous action, it is a major part of a business entity's assets. The FTC believes that this criterion is in keeping with the legislative intent of the FTL to regulate business combinations, yet will also save limited administrative resources.