An international hypermarket giant, which is the largest hypermarket chain operator in Taiwan, announced on 2 June 2020 that it would acquire the third-largest supermarket in Taiwan. The purpose of this acquisition is to make it the second-largest supermarket chain operator in Taiwan, said an official. Market watchers commented that the acquisition will pose a threat to other large-scale supermarket chain operators and that Taiwan’s Fair Trade Commission (“FTC”, 公平交易委員會) will also face difficulty in defining the scope of the “relevant market” in this case when the FTC examines the application for this merger.
According to paragraph 1 of Article 13 of the Fair Trade Act (公平交易法), the FTC may not prohibit any of mergers filed if the overall economic benefit of the merger outweighs the disadvantages resultant from any restraint of competition. Scholars have opined that the first step of examining a merger report filed to the FTC is to define the scope of the “relevant market” that will be affected by the proposed merger, including the “geographic market” and the “products market”. In the event that the relevant market is defined more broadly, the FTC might tend to approve the merger as the ratio of market share that the enterprise will have after the merger will be lower. In contrast, when the relevant market is defined in a more narrow way, the FTC will tend to consider the disadvantages of the merger, especially the effects of competition restraint, which are higher than the advantages thereof, and ultimately would likely prohibit the proposed merger.
Therefore, the FTC must define whether the “relevant market” is one that combines the market made up of both the “hypermarket” and “supermarket”, and even whether or not to include the “daily necessities market”. In addition, as one major shareholder of this hypermarket chain operator in Taiwan is the largest convenience store chain operator in Taiwan, the FTC may also have to consider whether it should add the “convenience store” market to the relevant market, as well.
As the relevant merger report for this proposed merger has not yet been filed, the vice chairperson of the FTC stated that the FTC could not further comment on this case, at present.