Yahoo-Kimo Inc's buyout of Wretch approved by FTC

The controversial acquisition of Wretch Co (無名小站) by Yahoo-Kimo Inc (雅虎奇摩), the nation's largest Internet portal, was approved by the Fair Trade Commission yesterday with several conditions attached to improve fair competition.

The commission said the operations of Yahoo-Kimo and Wretch, the nation's largest photo-sharing and blog service portal, only overlap in the area of Internet networking services.

As Wretch does not offer Internet shopping and auction services and 70 percent of its users are shared by Yahoo-Kimo, the merger has little impact on the popular services, the commission said in a statement yesterday.

"Given Wretch's tiny market share, the marriage would not apparently restrain the competition," Huang Mei-ying (黃美瑛), the commission's acting spokeswoman, said.

When Yahoo-Kimo announced the acquisition at the end of last year, local Internet operators, including Webs-tv.net (天空傳媒), Yam Digital Technology Co (蕃薯藤數位科技) and PC Home Online (網路家庭) aired strong opposition, arguing that the takeover would hamper the competition and diversification of cyber space.

They said the combination of Yahoo-Kimo and Wretch would seize an 80 percent market share of Internet traffic in Taiwan, and therefore Yahoo-Kimo may abuse its dominant presence to control the online advertising market.

To better quantify the possible effect, the commission used online advertising revenues to calculate market shares as these Web sites usually offer free e-mail accounts and search functions to lure heavy traffic, which in turn attracts advertisements -- their major source of income, Huang said.

Based on statistics released by the Brain magazine and the Internet Advertising and Media Association of Taipei (IAMA, 台北市網際網路廣告媒體經營協會), Yahoo-Kimo takes the lion's share, snatching nearly 60 percent of the market's advertising revenues, while Wretch only has around 1.75 percent.

Yahoo-Kimo reported that it raked in over NT$2.1 billion (US$63.5 million) in online advertising, accounting for 70 percent of its overall revenues last year, Huang said.

But the commission said the two parties must not limit competitors' operations. If illegalities are found, the commission is entitled to order the suspension or termination of the merger in accordance with the Fair Trade Act (公平交易法), Huang said.

Yahoo-Kimo welcomed the decision, saying the conditions set by the commission would not influence operations.

"These rules are already included in the Fair Trade Act... we have no intention of violating any of the regulations," Yahoo-Kimo public relations supervisor Ruu Wu (吳苑如) said by phone.

Wu said the acquisition was expected to be completed during the second quarter.

Webs-tv.net said yesterday that it respected the commission's decision and hoped Yahoo-Kimo would continue to nurture the emerging Internet business as it had promised previously, while abiding by fair play rules.