Criminal Charge Filed by Long Shong Pictures and Videos Co. against Lo Li-teh for Violation of the Fair Trade Law
Chinese Taipei
Case:
Criminal Charge Filed by Long Shong Pictures and Videos Co. against Lo Li-teh for Violation of the Fair Trade Law
Key Words:
concerted action, trade association, distribution of video tapes
Reference:
Supreme Court Judgment (84) Tai Fei Tzu No. 250
Industry:
Video Tape Rental Industry (7832)
Relevant Laws:
Article 2(3), Article 7, and Article 35 of the Fair Trade Law; Article 2(1) of the Enforcement Rules of the Fair Trade Law
Summary:
The defendant was the chairman of the Taoyuan Trade Association of Video Tape Programs. On August 26, 1993, the plaintiff, a video tape program distributor, dispatched personnel to Taoyuan to conduct a seminar on the new contracts. However, the plaintiff refused to have the agreement notarized by the court, in the belief that it was in violation of the Fair Trade Law.
In his capacity as the chairman of the Taoyuan Trade Association of Video Tape Programs, the defendant on September 4, 1993 issued a notice to all trade association members, knowing that the content was untrue. The notice included, but was not limited to, the following:
Long Shong (the plaintiff) deferred the release of the films “ Wang Che Chi Feng” and “ The New Hsien He Shen Cheng” , which were slated for release in the 1993 contract, to the 1994 contract. Long Shong also failed to have the agreement notarized in court, in the presence of the chairman of the trade association (the defendant), within the agreed-upon period of time, thus violating the agreement. Moreover, Long Shong raised prices for Taoyuan video distributors in order to make huge profits. As a conclusion, the Taoyuan video distributors were urged not to enter into contracts with Long Shong.
The above acts were sufficient to damage the reputation of the plaintiff (violations of Article 310(2) and Article 313 of the Criminal Law), and were against the prohibition that “ an enterprise shall not engage in concerted action” (Article 35 of the Law). Article 35 of the Fair Trade Law was the ground of the High Court judgment.
The reason for the Extraordinary Appeal was as follows:
Article 7 of the Fair Trade Law has clear stipulations on concerted actions, which is further supplemented by Article 2(1) of the Enforcement Rules of the Fair Trade Law. Investigations showed that although the trade associations are enterprises referred to in Article 2(3) of the Fair Trade Law, their mandate is “ to promote domestic and foreign trade, enhance economic development, coordinate matters between sectors of the same industry, and promote common interests” (referring to Article 1 of the Commercial Organization Law). Thus it is a logical conclusion, based on Article 7 of the Law, that trade associations are established to service it members, rather than to engage in trade. Since trade associations are obviously not in competition with their members, concerted actions can not occur.
The final judgment indicated that the defendant, using the name of the Taoyuan Trade Association of Video Tape Programs, issued a notice to all trade association members, urging them not to enter into contracts with the plaintiff collectively. There was no evidence showing that the defendant used contracts, agreements, or other forms of covenant to restrict business operations of the trade association members.
This case was different from the scenario where competition existed among the members of a trade association or the members’ representatives, thus becoming entities capable of concerted action. In the latter scenario, a concerted action agreement exists if the members or members’ representatives restricted competition or each other’ s business activities through the trade association. (Trade associations are deemed enterprises by the Fair Trade Law in such cases and are subject to prohibitions against concerted actions). These two categories of cases must be differentiated.
In addition, the term “ concerted action” as used in the Fair Trade Law refers to actions by multiple enterprises at the same level of production or distribution, i.e., horizontal restriction of competition. Accordingly, multiple entities is a requirement. However, in this case, the alleged unlawful acts were committed by a single party, the defendant. Therefore, the finding and application of law of the final judgment were erroneous.
From the above analyses, it was evident that the defendant‘s acts did not constitute concerted actions. The final judgment’s sentence was inconsistent with Article 35 of the Fair Trade Law.
In addition, when consumers buy or rent video tapes, they can always rent or purchase a different video tape if they can not find the tapes they want. The same is true for video distributors; if distributor A does not have sufficient numbers of tapes in stock, distributor A can always look to distributor B for additional copies. Therefore, even if the defendant‘s act did constitute a concerted action, it also has to be found that the act was sufficient to influence the trade of the products or the supply and demand of services in the market. (referring to Article 2(1) of the Enforcement Rules of the Fair Trade Law.) The final judgment neither took this into account during its investigations, nor were explanations given in the sentence, which made the judgment illegal.
Since the judgment was final and was against the defendant, an Extraordinary Appeal was brought in accordance with Articles 441 and 443 of the Law of Criminal Procedures.
Summarized by Chen, Hui-ping
Appendix:
Long Shong Pictures and Videos Co.’s Uniform Invoice Number:
86147329