An Exploration in Enterprises Concerted Actions in Economic Depression Regarding Consideration Reasons of Overall Economic Benefit under the Competition Law

Chinese Taipei

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Abstract:

When the economy is in temporary recession, market needs decline, prices drop drastically, then certain businesses try to face these problems by reducing their productions; otherwise overproduction will result and the businesses will be forced out. Domestically on two occasions, in 1998 and 1999, Chinese Taipei witnessed the Artificial Fiber Union and Processed Fiber Union apply for Concerted Action Permit.

Concerted Action in an economic downturn may protect companies that are still healthy and maintain their operation in order to prevent job loss. On the other hand, such measures may also cause the slow down in altering business structures and thus not phasing out certain unhealthy companies, causing unreasonable management due to concerted action in economic recess. It's a test for the authority concerned-in weighing positive and negative, measuring the economic elements in a whole.

We may find, in concerted action laws, some countries have stipulated "economic interests as a whole" or "public interests" as a guideline in approving concerted action applications.

Our Fair Trade Law is promulgated paralleled to the German Law, controlling level concerted action and is stricter in principle. "Economic depression," "Market price is lower than the average production cost," and "Beneficial to economy and public interests as a whole" are three major elements in constituting an approval of a Concerted Action Permit.

Being beneficial to the economy as a whole and "public interests" shall be considered as two aspects with the same definition, and therefore shall be managed identically. The reasons are:

(1) "Economic depression" stipulated in Article 14 (1) (vi) of the Fair Trade Law (FTL) has considered the economy as a whole.
(2) Concerted action-in certain economic background when it comes to "economic interest as a whole"-is resource diversification efficient or technically efficient, therefore, may reach a maximum effect in social security.
(3) The pursuit of "public interest" may not in all be based on the premise of competition. Thus it is the same with the "economic interest as a whole" and shall be considered as two aspects with the same definition, and therefore shall be managed identically.

This research also suggests using "controlled profit" as a borderline standard. Its operation is as follows:

(1) Authority shall reject any application and not allow for concerted action among businesses if the average profit of the production measures higher than the "controlled profit."
(2) Although authority shall allow an application for concerted action among businesses if the average profit of the production measures lower than the "controlled profit," two more elements should be considered:

A. Policy: If the businesses applying for a concerted action are those protected by the government, then authority may approve the concerted action. If not, then authority may not approve.
B. Operation in market mechanism: If authority deems market mechanism incapable of operation, then the authority may allow concerted action. If not, then authority may not approve.

Written by
Tseng Ming-yen, Hu Tzu-shun, Hsu June-shoang, Chang Hsin-yin (Planning Department)