Civil judgment regarding the claim for damages against Han Yang Motorcycle Company by Ming Yin Motorcycle Store
Chinese Taipei
Case:
Civil judgment regarding the claim for damages against Han Yang Motorcycle Company by Ming Yin Motorcycle Store
Key Words:
distribution, restriction of the enterprise's business activities, triple damages
Reference:
1998 Supreme Court Civil Judgment (87) T'ai Shang Tzu No. 343
Industry:
Motorcycle Retail Sales (5462)
Relevant Laws:
Articles 19(vi), 31, 32(1) of the Fair Trade Law; Article 24 of the Enforcement Rules of the Fair Trade Law; Articles 226(2) and 260 of the Civil Code
Summary:
Ming Yin Motorcycle Store (the appellant) claimed for damages against Han Yang Motorcycle Co., Ltd. (the appellee). The case is summarized as follows:
According to the appellant, its agreement with the appellee for the distribution of SYM motorcycles was effective from January 1, 1993 through December 31, 1993. Both parties agreed to renew the agreement for one more year after expiration of the said term. But the appellee terminated the agreement on November 1, 1994 and discontinued supplies to the appellant from the same day (i.e. two months before the agreement had expired), alleging that the appellant had breached the agreement. The appellant maintained it had not breached the agreement as it had not displayed samples or advertising boards of products of any other brand to affect the goodwill of the appellee's product. In addition to imposing improper restrictions on the trading counterparts' business activities as a condition of transacting business in violation of Article 19(vi) of the Fair Trade Law (FTL), the appellee's discontinuance of supplies for two months breached Section 1 of their agreement. Thus, the appellant claims damages in the total amount of NT$1,245,750 (i.e. triple the anticipated distributor's commission for a period of two months) plus interest in accordance with FTL Articles 31, 32(1) and Articles 226(2), and 260 of the Civil Code.
The appellee countered by arguing:
The appellant is only an agent, not a distributor. According to FTC Letter ref. Kung Shih Tzu No. 004, FTL Article 19(vi) does not apply to an agent agreements. Even if it had restricted the appellant from displaying samples or advertising boards of products of other brands, there is no likelihood of improper restriction or impediment to fair competition because there are various motorcycle enterprises competing on the market. Therefore, the appellant cannot claim damages in accordance with the FTL. In addition, it terminated the agreement and discontinued supplies to the appellant because the appellant had indeed breached the agreement by selling the product of another brand. Therefore, Article 226 of the Civil Code regarding non-performance does not apply and the appellant's claim based on the same is groundless.
Based on the evidence and both parties' argument, the original judgment of the Hight Court found:
The injured party in an FTL violation refers to the violator's competitor or the general consumer who is injured due to such violation. Even if the provision in the agreement in issue which prohibits the appellant from displaying samples of or advertising board for, or selling motorcycles of other brands in order to prevent the appellee's product goodwill from being adversely affected is in violation of the FTL, the injured parties in this case should be the appellee's competitors (e.g. producers of YAMAHA, KYMCO, SUZUKI motorcycles) or the general consumer, rather than the appellant. This point has been established by the fact that the appellant voluntarily entered into the agreement in issue with the appellee and the appellant's claim for the average monthly commission of NT$207,625. Therefore, its claim for a compensation triple the amount of the anticipated monthly commission for a period of two months in accordance with the FTL is groundless. Article 226 of the Civil Code provides: "If performance becomes impossible by reason of a circumstance for which the debtor is responsible, the creditor may demand compensation for any injury resulting therefrom. In the case provided for in the preceding paragraph, if part of the performance is impossible and the remaining part, if performed, will be of no advantage to the creditor, the creditor may refuse it and demand compensation for the nonperformance of the entire obligation." Since the appellant has alleged the appellee's breach of the agreement for terminating the agreement and discontinuing supplies to the appellant, there is no issue of non-performance on the appellee's part according to the said provision of the Civil Code (discontinuing supplies constitutes refusal to perform rather than impossibility to perform). Accordingly, the appellant's claim based on the said provision of the Civil Code for losses incurred from the discontinuance of supplies is groundless as well. The claim was thus dismissed by the Hight Court.
With regard to the appellant's claim for damages in accordance with FTL Articles 31 and 32(1) for the alleged violation of FTL Article 19(vi) by the appellee:
The term "restriction" under FTL Article 19(vi) refers to restrictions such as bundle sale, exclusive dealing, and restrictions regarding the territory, trading counterparts, use or business activities. According to Article 24 of the Enforcement Rules of the FTL, whether the restriction is improper shall be determined based on the intent, purpose, market position of the parties concerned as well as the structure of the market they belong to, the characteristics of the goods and the effect of the restriction on competition. Therefore, whether an enterprise is in violation of the aforesaid provision of the FTL shall be judged based on the element of "likelihood of impeding fair competition." The original judgment finding dismissing this portion of the appellant's claim is not against the law because the appellant cannot be an injured party even when the exclusive dealing clause contained in the agreement in issue infriges other people’s interests. Accordingly, the appellant's claim to revoke the original judgment in this aspect is groundless.
With regard to the appellant's claim for compensation of the anticipated commission due to the discontinuance of supplies by the appellee:
The appellant’s arguments has been that: according to the agreement in issue, the appellee should have supplied to the appellant through December 31, 1994. Because the appellee discontinued the supplies from November 1, 1994, the agreement is deemed terminated in accordance with Articles 226(2) and 260 of the Civil Code with the service of the appellant's complaint and the appellant is entitled to compensation for the anticipated commission for the period from November 1, 1994 through December 31, 1994, i.e. NT$415,250 (NT$207,625 per month for two months). This is a crucial argument from the appellant's side. The original judgment's reasoning in this aspect and finding against the appellant is considered insufficient and unsupported. Therefore, the appeal to revoke this portion of the original judgment is considered founded and thus granted. In conclusion, the appeal is considered partially founded and partially groundless.
Summarized by Chen, HweiPing
Appendix:
Han Yang Company’s Uniform Invoice No.: 23969136