The Fair Trade Commission (FTC) on Wednesday rejected a proposed merger between Holiday Entertainment Co (好樂迪) and Cashbox Partyworld Co (錢櫃) for the third time, saying it would create a monopoly.
Prior to Wednesday, the commission had twice rejected the application of the two karaoke operators to combine their business operations — in March 2007 and April last year — but both were rescinded by the Executive Yuan after the companies filed appeals.
After a thorough review, the commission said it still believed that there were no convincing arguments that the advantages of the proposed merger to the overall economy would exceed the disadvantages of restricting competition in the karaoke market.
The commission said Holiday and Cashbox, the nation’s top two biggest karaoke operators have a combined market share of more than 50 percent nationwide.
The two karaoke operators hold more than 90 percent of the market share in the Greater Taipei area, which is the sector’s core market.
“The merger of the two companies would create a monopoly and make it difficult for other karaoke operators to compete,” commission vice chairman Wu Shiow-ming (吳秀明) told reporters yesterday.
Wu said a merger could also weaken the competitiveness of other karaoke operators.
Moreover, any merger may negatively impact on both upstream karaoke tape agencies and end consumers, Wu said, adding that market competition was the best protection for consumers.
Morris Li (李俊德), a financial department director at Holiday, yesterday expressed regret over the FTC’s decision, saying the merger could help the two companies save around NT$100 million (US$2.96 million) a year amid the economic downturn.
Li said Holiday, with around 50 karaoke stores nationwide, saw its revenue drop 3.43 percent in the first quarter from a year earlier, as consumers cut back on spending.
“The situation appears to be getting worse,” Li said by telephone.
Li said the company would decide during its next board meeting at the end of this month on whether to file another appeal.
Wu said the FTC understood that the purpose of the merger between the two companies was to save costs but said that merger was not the only way to achieve cost savings.
“Businesses should try to compete in order to survive, even during economic downturns,” Wu said.