Abstract:

I. Background and Current Situation

Following the recent changes in the general public's style of spending, the domestic logistic enterprises have grown rapidly with a substantial amount of capital and operate with a method of buying low and selling low. The logistic enterprises' "buying low and selling low" method of operation has caused a substantial impact on the traditional wholesale and retail industries. As a result, the logistic enterprises no longer merely play a role of intermediary between the manufacturers and consumers. Rather, they take advantages of all kinds of promotions to stimulate purchases from the consumers and utilize complicated logistic techniques to control the channels of marketing. Without the logistic enterprises, the manufacturers and suppliers will not be able to successfully expand their businesses in the market. Under the circumstances where the process and techniques of marketing are getting more and more complicated and the manufacturers have lost control in the channels of marketing, the role of logistic enterprises has become more important than ever. After the establishment of the domestic chain logistic enterprises and the introduction of advanced informational technologies to this nation, the logistic enterprises has revolutionized. With rapid expansion in business, the logistic enterprises gradually have the superior bargaining position as a buyer to demand favorable contract terms from up-stream suppliers. However, the superior bargaining position of logistic enterprises as a buyer has incurred several unfair competition or antitrust issues such as compelling their suppliers to pay additional fees, restricting the price of products of suppliers and demanding the most favorable prices from suppliers.

This research is conducted in order to understand the current condition in operating a supermarket chain store and the competition among supermarket chain stores after the expansion of a supermarket chain store becomes the norm. This research is also conducted to understand the regulations set forth in the Competition Law of other countries on the operation of a logistic business.

II. Conclusion and suggestion

The investigation of this research shows that domestic supermarket chain stores have the following characteristics:

1. Market structure:
Observation from the geographical distribution of all supermarket stores shows that 450 supermarket stores (half of the domestic supermarket stores) are collectively located in the northern Chinese Taipei. Observation of the number of supermarket stores in all municipalities shows that most supermarket stores are collectively located in downtown areas. The Taipei city and county have 270 supermarket stores - that amounts to the highest number of supermarket stores located in one municipality. Observation of the market share for each system of the supermarket chain stores shows that the Wellcome Supermarket Chain operates 70 Wellcome supermarket stores in Taipei city and county, which amounts to 25.93% of the total number of supermarket chain stores.

2. Operation efficiency:
Observation of the geographical operation efficiency of all supermarket stores shows that on average, supermarket chain stores located in the middle part of Chinese Taipei obtain 20.55 % of profit, 17.47 % for supermarket chain stores located in northern Chinese Taipei and 13.67% for supermarket chain stores located in southern Chinese Taipei.

3. Vertical transactional relationship between the supermarket chain stores and their up-stream supplier:
(1) There are merchandise up/off shelf standards between supermarket chain stores and their suppliers. The up-shelf standards include quality, price, advertisement and matching of market needs. The off-shelf standards mainly include selling quantity less than the minimum selling target or the poor selling of the same kind of merchandise. Around 64.29% of supermarket chain stores have penalty rule for merchandise shortage. The calculation of penalty usually equals the amount or days of shortage multiplied by the contracted percentage.
(2) Problems in collecting additional fee: According to the data received from the existing addition fee collection almost every supermarket chain store uses the written contract to collect additional fee from 1 to 13 items, respectively (the Department of Defense does not collect the additional fee). The way of collecting additional fee mainly by use of a loan for the deduction.

According this research, the countries advanced in law will revise their relevant laws to prevent large scale logistic enterprises abusing their relatively superior (market) bargaining position. In particular, Japan implemented the rule of "Operational guidance for prohibiting monopoly for logistic trade behavior" on July 11, 1991. It clearly treats the behavior of logistic enterprises, asking for the supply of sponsored funding from their suppliers, as the behavior for abusing the relatively superior bargaining position. It will be treated as an illegal action taken by enterprises, the collecting of an additional fee from suppliers and the enterprises thereby utilizing their superior position to give greater pressures on suppliers, causes an imbalance among suppliers. Though, the Fair Trade Commission of U.S. does not give clear direction in regulating such an action, the Fair Trade Commission of U.S. does realize the problem existed and is willing to pay more attention to this issue, which was evidenced from the conference conclusion held on May 31st and June 1st, 2000. The regulations of the Fair Trade Law of ROC on logistic enterprises (including supermarket chain stores) include the relatively superior position of enterprises after a dramatic expansion, concerted action to ask suppliers stop supplying, or asking an improper additional fee from suppliers, demanding suppliers to offer the most favorable price, improper calculation of penalty for merchandise shortage and unclear condition for merchandise off shelf. In order to allow enterprises to follow, "the explanation of regulation of the Fair Trade Law on the Logistic Enterprises" is released. The Fair Trade Commission is entitled to press for sanctions on enterprises that violate such a law and the Fair Trade Commission has accumulated several experiences in this regard. Other than the existing near 10-year law enforcement experience, the Fair Trade Commission still needs to work hard on the following directions:

1. Enhancing the collection and analysis of dynamic information for business and enterprises:
The Fair Trade Law is a Law of Economy. According to the law enforcement experience of other countries, an analysis of the business market is essential. In addition to the use of theory as a base, the economic analysis also needs to meet the demand of current market reality. The Fair Trade Commission should regularly collect a variety of business information and enterprise data and the dynamic trend of market so that those can become the references for the future ruling for logistic enterprises.

2. Close monitoring the business transaction and standing with the tough law enforcement:
In the past year, the Fair Trade Commission charged four logistic enterprises which violated the law of abusing superior market position or collected an improper additional fee. The accumulated penalty was NT $12,600,000. However, the behavior of abusing the market position and collecting an improper additional fee amongst logistic enterprises still exists and behaves in a different pattern which has caused a very bad influence on consumers and the whole economic society. Therefore, the Fair Trade Commission should continue to monitor such a development and utilize their tough law enforcement.

3. Understanding the recent development of competition law from foreign countries:
In Japan, U.S.A., Australia and European countries, the development and practice of competition law are several years ahead of R.O.C. Specially, our economic style is very similar to Japan. The pathway for developing logistic enterprises is also similar and the problems existing between logistic enterprises and their suppliers are almost identical. Therefore, the relevant laws and regulations applying to this type of business can become our learning example. There is a theory to urge that the trading condition between logistic enterprises and their suppliers belongs to the category of private contact and the competition law should not get involved. It is a questionable argument. The Fair Trade Commission should give the general public a clear definition and regulation to deal with these issues. The experiences from other law advance countries are worthy to learn.

Written by
Chen Yuhn-Shan, Tai Pei-Yi, Lin Yi-Chau, Taur Rong (First Department)