Next Media acquisition breaching regulations

By Lai Chung-chiang 賴中強  / 

Tue, Jan 01, 2013 - Page 8

The proposed buyout of Next Media Group’s print and television business in Taiwan has received a lot of attention in recent weeks.

A few days ago, the United Daily News cited comments by an unnamed Ministry of Economic Affairs official who stated that because the seller of Next Media, Database Gateway (DGL), is registered overseas and because the four prospective buyers — four companies owned respectively by Formosa Plastics Group chairman William Wong (王文淵), Want Want China Times Group president Tsai Shao-chung (蔡紹中), Chinatrust Charity Foundation chairman Jeffrey Koo Jr (辜仲諒) and Lung Yen Life Service Corp chairman David Lee (李世聰) — are also registered overseas, the deal is foreign companies buying another foreign company. As such the Investment Commission does not need to examine the source of the investment capital.

After official approval by the commission, Next Media Group used three companies owned by DGL to set up branches in Taiwan to run the publication of the Chinese-language Apple Daily, Sharp Daily and Next Magazine.

These so-called “branches” registered with the ministry and their main business operations are conducted in Taiwan: The Next Media acquisition is definitely not a transaction occurring between foreign companies outside of Taiwan.

According to Article 8 of the Statute for Investment by Foreign Nationals, (外國人投資條例), the competent authorities must approve the establishment of branch offices in Taiwan and Article 9 states, the amount of investment involved in their establishment must be officially approved. Article 10 further states that when investors transfer their investments, the transferor and the transferee must jointly apply for approval of the deal with the competent authority.

Because a branch does not have independent shares that it can transfer, the investment transfer mentioned in Article 10 should be understood as including any instance in which their senior overseas shareholder, DGL, transfers their shares, because the branches are the ones conducting the main business operations of the parent company here in Taiwan.

When dealing with the equity transfer of RCA Corp, the Investment Commission established the principle that whenever a transfer of investment by a foreign company occurs and is detrimental to national security, the public, morality or the interests of Taiwanese, the commission has the right to reject it.

Through the Next Media acquisition, the China Times newspaper will gain the Apple Daily, the China Times Weekly and Next Magazine. This will create a situation in which media outlets are excessively controlled by a privately owned media corporation. This will limit the diversity of reporting.

According to the International Covenant on Civil and Political Rights (ICCPR), the Next Media acquisition is an encroachment on freedom of speech and runs counter to the protection of human rights listed in the Constitution. It is detrimental to the public and morality and the Investment Commission should prohibit the transfer.

Taiwan’s current laws do not allow Chinese investors to directly or indirectly operate media outlets here in Taiwan.

When the senior foreign shareholders of Apple Daily do change, the commission should look in to the sources of the buyers’ capital, equity agreements, the beneficiary and request the buyer disclose all transactions it has made with Chinese state-owned enterprises or private Chinese businesses, to decide if the purchasing company is controlled by Chinese capital.

Lai Chung-chiang is deputy president of the Taiwan Association for Human Rights.

Translated by Drew Cameron