Fair Trade Commission Policy Statements on the Distribution of Elementary School Textbooks

Passed by the 450th Commissioners' Meeting on June 22, 2000
Amended by the 571st Commissioners' Meeting on October 17, 2002
Promulgated by Order (91) Kung Er Tzu No.0910010993
Amended by the 684th Commissioners' Meeting on December 16,2004
Promulgated by Order (93) Kung Er Tzu No.0930009785
Titled Amended by the 688th Commissioners' Meeting on January 13,2005
Promulgated by Order (94) Kung Fa Tzu No.0940006493 on August 26,2005

Elementary and junior high school textbooks were exclusively issued by the National Institute for Compilation and Translation of the Ministry of Education in the early days, and these textbooks were accordingly known as " Ministry Textbooks." Private publishers have been allowed to edit and print such textbooks since 1996, however, and such textbooks are termed "Approved Textbooks" in reflection of the fact that they must be examined and approved by the Ministry of Education. Currently, elementary and junior high schools' administrative conferences handle the procurement of textbooks in accordance with Article 8-2 of the National Education Law. After the textbook publish market was opened, some publishers of "Approved Textbooks" have used marketing methods such as the donation of free teaching aids or gifts to boost sales or retain market share. Some publishers attempt to restrain the business activities of their trading counterparts by selling packages of books or restrict distributors' resale prices. Above all, actions such as giving commissions to teachers or other disguised benefit-seeking behavior are actually tantamount to corruption and in violation of the Teachers Act, and have a negative influence on national education in Chinese Taipei.

The aforementioned improper marketing actions have obviously impacted the selection of national elementary and junior high school textbooks. These actions constitute unfair competition for those other competitors in the same business who have not employed the same marketing actions. In order to maintain trading order and ensure fair competition, the Fair Trade Commission has gathered and analyzed the various types of action by relevant companies that may violate the Fair Trade Law, and the resulting information was used to compile this Explanation of Fair Trade Law Guidelines. Relevant businesses must comply with the Explanation of Fair Trade Law Guidelines, which shall be used by the Commission as a reference in the handling of relevant cases.

As specified in the Instructions and Guidelines, sales enterprises shall refer to publishers, distributors, bookstores, and other sales enterprises involved with elementary and junior high school textbooks.

If a sales enterprise whose market status conforms to that of a monopolistic enterprise as prescribed by the Fair Trade Law engages in any of the following actions, it may be deemed in violation of Article 10 of the Fair Trade Law: 1. directly or indirectly preventing any other enterprises from competing by unfair means; 2. improperly setting, maintaining or changing the price for goods or the remuneration for services; 3. causing a trading counterpart to give preferential treatment without justification; or 4. otherwise abusing its market power.

If a sales enterprise, by means of contract, negotiation or any other form of mutual understanding, conspires with any other competing enterprise to jointly determine the price of goods or services, or limit trading terms pertaining to quantity, technology, products, facilities, trading counterparts or trading area with respect to such goods and services, etc., and thereby restrict each other's business activities, such a concerted action may be deemed in violation of Article 14 of the Fair Trade Law.

Where a sales enterprise supplies goods (books) to its trading counterpart for resale to a third party or such third party makes further resale, if such a sales enterprise restrains the resale price, it may be deemed in violation of Article 18 of the Fair Trade Law.

Discrimination may occur when a sales enterprise sells books directly to schools through other sales enterprises prior to the end of each semester and only then, after each semester ends, supplies such books to another marketing channel provider (bookstore), leaving the bookstore poor sales opportunities. Actions similar to the aforesaid example where one enterprise discriminates against another enterprise of the same competition level without justification and restrains competition or impedes fair competition may be deemed in violation of Article 19, Subparagraph 2 of the Fair Trade Law.

Where a sales enterprises provides the users of the textbooks gifts in order to promote sales, if the value of the gift given away exceeds the upper limit (for products priced over NT$100, the maximum value of the gift shall be 1/2 of the selling price of the product, and for products priced less than NT$100, the maximum value of the gift shall be NT$50) prescribed in the Fair Trade Commission Guidelines on Cases Concerning Promotion by Means of Gifts and Prizes, said sales enterprise may be engaging in behavior that causes the trading counterpart(s) of its competitors to do business with itself by inducement with interest, in violation of Article 19, Subparagraph 3 of the Fair Trade Law.

If a sales enterprise, without justification, restrains a distributor from operating its business in multiple areas, and such an action may lessen competition or impede fair competition, the sales enterprise may be deemed in violation of Article 19, Subparagraph 6 of the Fair Trade Law.

Where a sales enterprise requests its trading counterpart(s) to purchase tied-in products, and such an action may lessen competition or impede fair competition, said sales enterprise may be deemed in violation of Article 19, Subparagraph 6 of the Fair Trade Law.

Where a sales enterprise requests its marketing channel provider(s) to purchase books in sets, or refuses to perform a sale; or where a sales enterprise, without requesting the marketing channel provider(s) to purchase books in sets, restrains the marketing channel provider(s) from returning the goods in single volume, directly causing the marketing channel provider(s) to have to sell the books in sets to consumers, such actions may restrict trading counterparts' business activity improperly by imposition of conditions and may be deemed in violation of Article 19, Subparagraph 6 of the Fair Trade Law.

3.9.1 If a sales enterprise improperly disseminates promotional advertisements with deceptive content sufficient to affect trading order, such a sales enterprise may be deemed in violation of Article 24 of the Fair Trade Law.

3.9.2 If a sales enterprise abuses its superior market position or employs improper means to impede its trading counterpart's free will concerning entering into a transaction and transaction terms, or acts against the ethics of commercial competition, i.e. by reserving a distribution agreement for its trading counterpart, or making a trading counterpart trade with itself by means of interference, importunity, or displeasure, such a sales enterprise may be deemed in violation of Article 24 of the Fair Trade Law.

3.9.3 If a sales enterprise gives improper money, items, or other economic benefits to secure opportunities for the sale of its textbooks, such an action shall be against the ethics of commercial competition and may be deemed in violation of Article 24 of the Fair Trade Law.

3.9.4 Examples of the aforementioned money, items, or other economic benefits are listed as follows:

i.i. Money in the form of supplying seminars, workshops, facilities, office supplies, or in other names.

i.v. Travel expenses or allowances for participation in seminars, workshops, or other activities.

v.i. Excessive remuneration for editing work (i.e. remuneration in the form of review fees, opinion fees, editing participation fees, information gathering fees or other editing/writing fees) where the true purpose for the remuneration is to secure textbook sales opportunities.

v.ii. Money to subsidize major activities of the school (i.e. games or school anniversary celebrations).

i. Supplementary teaching aids that is irrelevant to the utilization of the textbooks in question, i.e. dictionaries or magazines.

iii. Other improper provided items, i.e. cameras, televisions, VCRs, refrigerators or clothes.

4.1 The Fair Trade Commission may, in accordance with Article 41 of the Fair Trade Law, order any enterprise that violates any of the provisions of this Law to cease therefrom, rectify its conduct or take necessary corrective action within a limited time period; in addition, the Commission may assess upon such enterprise an administrative penalty of not less than fifty thousand (NT$50,000) nor more than twenty-five million (NT$25,000,000) New Taiwan Dollars. If such an enterprise fails to cease therefrom, rectify its conduct or take required necessary corrective action after the lapse of the prescribed period, the Commission may continue to order such enterprise to cease therefrom, rectify its conduct or take any necessary corrective action within a limited time period, and each time may successively assess thereupon an administrative penalty of not less than one hundred thousand ( NT$100,000) nor more than fifty million (NT$50,000,000) New Taiwan Dollars until the enterprise in violation ceases therefrom, rectifies its conduct or takes the required corrective action.

4.2 In accordance with Article 35, Paragraph 1 of the Fair Trade Law, if any enterprise violating the provisions of Articles 10 or 14 of the Fair Trade Law is ordered by the Commission pursuant to Article 41 to cease therefrom, rectify its conduct, or take required corrective action within a limited time period, and such an enterprise fails to cease therefrom rectify such conduct, or take any required corrective action after the lapse of such period, or such an enterprise commits the same or similar violation again after having ceased therefrom, the violating enterprise shall be punished by imprisonment of not more than three years or detention, and/or a fine of not more than one hundred million New Taiwan Dollars (NT$100,000,000).

4.3 In accordance with Article 36 of the Fair Trade Law, if any enterprise violating the provisions of Article 19 is ordered by the Commission pursuant to Article 41 to cease therefrom, rectify its conduct, or take required corrective action within a limited time period, and after the lapse of such period, and such an enterprise fails to cease therefrom rectify such conduct, or take any required corrective action after the lapse of such period, or commits the same or similar violation again after having ceased therefrom, the violating enterprise shall be punished by imprisonment of not more than two years or detention, and/or a fine of not more than fifty million New Taiwan Dollars (NT$50,000,000).

4.4 If any enterprise violates the provisions of the Fair Trade Law, in addition to criminal or administrative liabilities, such an enterprise shall also bear civil liability for damage compensation in accordance with Chapter 5 of the Fair Trade Law.

5. This Explanation of Fair Trade Law Guidelines focuses on possible violations of the Fair Trade Law by the elementary and junior high school textbook supplying industry, and provides an outline and examples of violations of the Fair Trade Law. Where the content is incomplete, the Commission may supplement or rectify this Explanation at any time. Specific cases shall still be handled and judged in accordance with individual facts.