Putting Competition Policy into Effect and Enhancing National Competitiveness
---Analysis of Implementation of the Fair Trade Law

A. Origin

“National competitive capacity” has become a goal for the government policy in every country. The world's two major organizations for ranking national competitive capacity are the International Institute for Management Development (IMD) and the World Economic Forum (WEF). Every year, the rankings for national competitive capacity announced by both or either of organizations become an important index for assessing results of the government's policy implementation. According to the rankings for the world competitive capacity published by IMD in recent five years, Taiwan is placed in the rankings between 11th and 18th. Compared with neighboring countries like Japan, Korea and China, Taiwan was often ahead. On the other hand, in the rankings for the world competitive capacity having published by WEF in the recent five years, Taiwan is ranked between 4th and 14th, especially in 2005 when Taiwan reached the 5th in the world and the 1st in Asia. Looking at the current international economic situation, Taiwan has faced lots of challenges and competition. There are some countries – for example, Brazil, Russia, India, China, (the “BRIC”: an acronym referring to the fast growing developing economies) and Middle and Eastern European countries belonging to the former USSR. These have caused a great threat to Taiwan's national competitive capacity. Therefore, how to overcome current problems and how to effectively increase Taiwan's competitive capacity becomes crucial. Of course, it is also necessary to rely on collaboration among the governmental departments, industries and all social fields. In “Complete International Competition Laws and Regulations” in the World Competitiveness Yearbook in 2006, Taiwan was ranked 35th – falling from its 22nd position of 2005. We went behind Singapore, Hong Kong, and Korea. In “Effectiveness of Anti-Trust Policies” in the annual report for the Global Competition Review in 2007, Taiwan was ranked as the 27th– dropping from the 24th position of 2006 – and fell behind Singapore and Korea. However, we like to ask questions – how on earth are the competition law has been carried out How on earth is the environment for market competition These become the issues that attracts much attention. Therefore, how to improve fair competitive environment and further increase national competitive capacity is what the competition authority, the Fair Trade Commission, Executive Yuan, need to do.
The purposes in setting up Fair Trade Law are to protect trading order and consumers' benefits, to ensure fair competition, and enhance economic stability and prosperity. So, it is also called “Economic Constitution” simply because it has great influence on national economic development and is closely connected with national competitive capacity. It has been 16 years since the Law was passed in 1991. How effectively do the competent authority, the Fair Trade Commission (FTC), Executive Yuan, carry out the Fair Trade Law What do enterprises think about and expect from the Fair Trade Law What measures should the FTC adopt in response to the rankings for international competitive capacity conducted by international organizations such as IMD and WEF It is hoped to develop an excellent competitive environment and further enhance national competitive capacity. These are what are concerned in this research.

B. Research Methodology

1. Literature Review: By organizing and analyzing current information, such as competition policy, reform performance of competition policy in every country, national competitive capacity, relationship between competition policy and national competitive capacity, rankings for international competitive capacity conducted by international organizations such as IMD and WEF, and then review the results of FTC's law implementation for the past 16 years. This research can make further explorations of the subject.

Descriptive Statistic Analysis: To analyzes the result of questionnaires about investigation on business performance of the Fair Trade Law. The contents of returned questionnaires, that people working in industries have filled, and quantified. Diagrams will be made to convey real meanings to understand the degree and approach of industries' cognition towards the contents of regulations of the Fair Trade Law, how beneficial and helpful the Fair Trade Law is to national competitive capacity, the satisfaction toward FTC's policy, and suggestions for the FTC.

C. Main Suggestions

After the above-mentioned methods are employed to make analyses on research subjects, this research suggests the FTC carry out the Fair Trade Law effectively, deepen the guiding by creating a better understanding of fair trade principles, continue building a fair trade system, and strengthen the training of employees and the quality of implementation of the law. It is hoped, through these improvements, to help increase the national competitive capacity and enhance citizens' welfare. The suggestions are listed as follows.

1. Effective Implementation of the Fair Trade Law

Implementing the Fair Trade Law is the FTC's first priority. According to the result of questionnaires, it shows that 85﹪of the interviewees believes that carrying out the Fair Trade Law indeed helps improve national competitive capacity. However, about 70% of the interviewees think that the FTC need to improve the law implementation, especially on concerted actions and false and deceptive advertisements. In addition, having implemented the law for over 16 years, the FTC has built up a very solid foundation and rich experiences of how to carry out the law. FTC should think over how to implement the Fair Trade Law effectively to assist industries to establish healthy mechanisms for a fair competition market.

1. To select key industries for observation and investigation
   The scope regulated by the Fair Trade Law spreads over every industry. How can the FTC cope with so many complicated anti-competition behaviors within limited manpower, materials, and administrative resources How can the FTC effectively concentrate on the focus of policy implementation and strengthen its effectiveness It is suggested that the FTC select key industries every year -- especially those crucially related to economy development or the public's rights and interests. According to different industrial features or economic types, the FTC should profoundly analyze and concern industrial developments, review their reasonability of structure and system, investigate key industries involving with restrictive and unfair competition behavior that hinder competition, build up regulations for a competitive market, and ensure market order.
2. To strengthen investigations on concerted actions and false and deceptive advertisements
   (1) Concerted Actions
   1. To carry on paying attention to movement of managing industries. If any evidence of a concerted action is discovered, the FTC should initiate an ex officio investigation immediately.
   2. In some highly-regulated industries, the competent authorities' control measures often become tools for collaboration. For example, although a price cap control that competent authorities set up is designed to protect consumers, it often leads to focal point equilibrium. Therefore, the situation in which competent authorities coincidently set a price cap leads to the result that all the enterprises charging the cap price and restrict competition. So it is necessary for FTC to negotiate with the central industry competent authorities duly to review relevant control measures (for example, rate). The FTC also needs to keep on with regulation reform and introduce mechanisms for market competition.
   3. Because a concerted action will lead to market structure change, merger enterprises and competitors possibly confine business activities to one another. Or, if they don't restrict with each other, they might engage in concerted actions and then market will fall into a non-competitive situation ). When reviewing the reported merger cases, the FTC should focus on a detailed inspection of whether the mergers easily cause joint negotiation or lead to concerted actions. It is expected to create a market environment that is not easy for concerted actions form the structure side.
   4. If demand and supply become unbalanced in market and then this situation trigger important goods and materials in people's livelihood to soar, the FTC should act to avoid proprietors to use this opportunity to engage in a concerted action driving the prices up, viciously stock up, or manipulate prices. The FTC should also actively contact relevant competent industrial authorities, unions, and proprietors, effectively grasp the movement of goods and materials in upstream, midstream and downstream markets and announce and investigate prices of goods and materials if necessary. These actions can help trading information be more transparent, reduce the public's insecurity, and erase improper pre-guessing and gambling psychology about soaring prices in all social fields.
   5. The concept of danger resulted from concerted actions can be publicized to guide enterprises and consumers towards a better understanding. Doing so, FTC can attract help from the public so that enterprises can fully obey the regulations of Fair Trade Law and consumers can also actively discover cases of merger behavior and report them to FTC.

(2) False and Misleading Advertisements

1. To positively lay bare evidences of and make an investigation of enterprises, which are involved with false and misleading advertisements and counterfeit behavior offending against the Fair Trade Law, according to positions of office in order to ensure protecting of the trading order and consumers' benefits.
2. To strengthen division of labor and cooperation with relevant competent authorities, including Department of Health, Government Information Office, Ministry of Economic Affairs, and other inspection, police and investigation organizations. Through positively contacting these competent authorities, it is expected to attack illegal and employ administrative resources effectively to break through the limit of humane resource shortage.
3. To review principles of handling relevant cases, to improve standardization and transparency of the FTC's implementation of the law, and to enhance quality and efficiency of case handling. Such arrangements can encourage proprietors to understand and obey the law.
4. To engage with the plan of comprehensive supervision and control over false and misleading advertisements, and to efficiently and effectively investigate enterprises conducting false and misleading advertisements. Meantime, the FTC should select industries involving with fierce competition and the proprietors often offending against the law and carry out the plan of inspection on false and misleading advertisements so that proprietors can understand the content of the Fair Trade Law and its practical aspect and further restrain themselves and also obey the law. Also, the FTC should help improve the general public's cognition towards relevant advertisements and also ensure consumers' rights and interests.

2. To Make a Better Understanding of Fair Trade Principles
   Although some industries in Taiwan have some understanding of the Fair Trade Law, relevant laws and decrees are continuously added and revised for the wave of government deregulation and newly developed industries. Not only can propagate the Government's decrees, letting people in every field to understand the content and implementation of the Fair Trade Law, but also help maintain trading order in the market. Therefore, the proprietors' rights and interests will be ensured. Therefore, the FTC should propagate the principles of Fair Trade Law into all relevant competent authorities and every filed. Therefore, the concerning principles can be continuously widespread, and people of all fields can understand and obey the law.
   1. Targeting Consumers for Propaganda
      (1) To carefully schedule for propaganda and to make good use of Internet, mass media, light box advertising and other diverse promotional channels. With good plans and use of various communication channels, people's cognition towards the Fair Trade Law and understanding of the FTC's implementation and performance of various policies can be possibly achieved.
      (2) To establish partnerships with governments of counties and cities, select different issues every year and entrust city or county governments to deal with regional propaganda activities. Then the fair trade principles can be propagated and deepened in local townships.
      (3) To join activities that other competent authorities (for example, Consumer Protection, Executive Yuan, and Southern Taiwan Joint Services Center, Executive Yuan) organize and to set up stalls or booths. It is expected that fair trade principles can be passed to others and also competition policy can be put into effect.
      (4) To proceed with an investigation on how many participants and what level of satisfaction towards the activities as well as towards the FTC's policy implementation while organizing the early-mentioned activities. Through this process, the FTC's policy implementation and propagated results can be fully understood.
   2. Targeting Enterprises for Propaganda
      (1) To organize forums for explaining key industries or competition rules so that industries' managing behavior can be actively adjusted to obey and coordinate with the Fair Trade Law positively. Meantime, FTC should also improve industries' disciplines.
      (2) To organize forums for high-level managers and to strengthen two-way communications with the industries. It is wished to effectively listen to proprietors' voice, to profoundly understand needs of industries, and to make a response duly, and to bring their opinions into references for the future's policy implementation plans.
      (3) To organize forums concerning the Fair Trade Law for industrial and commercial groups or companies. It is expected to mobilize industries to implement rules related to the Fair Trade Law and FTC's key policy implementation and achievement.
      3. Internet information becomes a major channel of understanding Fair Trade Law and FTC's policy implementation. Therefore, FTC's various administrative information can be presented when its WebPages is revised in the near future. The WebPages can be improved to help the searches and inquiries of people working in all fields.
3. Continuing to Study and Revise the Fair Trade System
   1. To Review and Revise the Fair Trade Law
      The Fair Trade Law is an economic law based on economic theories and legal regulations as means. How regulations can meet varieties of complicated economic phenomenon and not jeopardize legal stability needs to rely on them being reviewed, studied and revised duly and having administrative rules related to the Fair Trade Law explained. After the FTC was set up, the law has been revised for three times. In 2002, the third revision was made. Since then, it has been over 5 years. During the period, the economy has been changed a great deal; competitive environment has been approaching towards its diversity. In advanced countries in the world, the competition authorities have continuously proceeded with competition reforms, especially introducing leniency programs and warrant for entry of premises for administrative entity as their key revision issues. All kinds of positive reforms have created fruitful economic results and stable economic growth and prosperity. As a member of the international community, the FTC should take international competition policy reform and experience as references and review, study and revise related competition regulations so as to catch up with the trends. Meantime, FTC should increase standardization and transparency of law implantation and help proprietors to understand and obey the law.

   This time, the FTC will make an overall revision on suitable scopes and rules of the Fair Trade Law. The key revision points include: to supplement warrant for entry of premises for administrative entity , to improve efficiency and effectiveness of law implementation, and to put independent competent authorities' quasi-judicial investigative function into full play. Introducing foreign new investigative system of “leniency program,” the FTC aims at enterprises that are engaging in concerted actions but actively reveal what is going on and offer help with investigations. These industries can reduce or get rid of administrative duty and receive different types of punishment for illegal behaviors. According to different punishment rules, the FTC proceeds with tribunal legal system, builds up fairness and transparency of law implementation and makes Taiwan's fair trade system complete. This leads to a positive influence on future enforcement of the Fair Trade Law. Of course, keeping on catching up with the world's economic situation and trends and effectively stopping behaviors of offending against the Fair Trade Law from building up a complete system should be made to advance economic developments and protecting consumers' interests at home.

   2. To Strengthen Ministerial and Departmental Collaboration and Get Rid of Any Barrier to Join the Market
      To protect and enhance domestic competition environment and improve the ranking in indexes of national competitive capacity, the FTC needs to realistically carry out the Fair Trade Law, and the Government's various industrial policies and economic laws which should also have their whole and comprehensive packages. All laws and regulations should be reviewed to ensure fair competitive environment among enterprises. FTC, as the competition authority, should negotiate with relevant ministries or department about rules and regulations that are contradictory to the spirit of Fair Trade Law.

   In the viewpoint of enterprises, at present, most unfair competition behaviors in market are involved with positions and duties of other governmental ministries and departments. They cannot be regulated by the Fair Trade Law alone. Naturally, it needs cooperation among all ministries and departments. Therefore, the FTC should integrate the Governmental relevant competition laws and regulations, strengthen communications with every ministries and departments and work together to bring free and fair competition spirit into making and implementing policies. There are still many ongoing tasks as follows – keeping on revising the Fair Trade Law, reviewing detailed regulations hindering competition, getting rid of entry barriers of the market, making competition law system more complete and increasing fair competition in market. Hopefully, all enterprises and enterprises can enjoy competition freely on the base of fairness. Once free and fair competitive environment is constructed, industrial development and upgrading, as well as industrial managing effective and general national competitiveness, can be further much improved.

4. To Improve the Training of Employees and the Quality of Implementing the Law
   1. Training of Employees: The Fair Trade Law contains both economic and legal characteristics. This law is employed to deal with rapidly transformed economic affairs – which need to involve with enormous complex and complicated situations. In the process of law implementation, the FTC's staffs require enough professional ability to maintain a solid foundation for law enforcement. At present, FTC's internal employees have received training as follows. According to what is needed in case investigations, occasionally experts or scholars in relevant competent authorities (for example, judicial competent authorities, Securities and Futures Bureau, Financial Supervisory Commission, Executive Yuan, etc.) are invited to deliver speeches on special topics. Through benchmark learning, other competent authorities' investigation experiences and approaches are introduced, in order to improve staffs' quality of law implementation. In-depths trainings with handling technique, such as “Forum for Cases and Case Handling Methods,” “Lecture for Specialty of Investigators,” etc. are organized. To new employees, short-term basic training courses are arranged so that these employees can be familiar with fair trade investigation affairs as quickly as possible. In addition, to senior staffs, it is necessary to make regular investigation on their needs and to schedule yearly trainings and proceed with practical approaches for these senior staffs. Even, they can be sent to receive trainings abroad in order to widen and deepen their visions. The above-mentioned training can help strengthen the case handling ability of employees of the FTC.
   2. Quality of Law Enforcement: As the competition authority , the FTC needs to deal with investigation into affairs offending against the Fair Trade Law or endangering public interests and benefits according to the law. Because legal validity immediately occurs once an administrative decision is made, the impact on enterprises involving cases and even general industries must be enormous. Therefore, the deliberative process of considering cases should be very comprehensive. To effectively enhance the quality of law implementation, when big cases or newly developed types of cases are involved, legal application and evidence should be concerned.

   Meantime, it also needs to be ensured that FTC's disciplinary actions on cases and applications of the law are all proper. In addition, in the deliberative process of considering cases, schedules and directions in case investigation should be regularly reviewed. Also, two-way communications between investigation departments and review committee members should be strengthened. For example, when evidence collections, legal applications or other problems in the investigation process are encountered, committee members should actively propose a report for review. Then, review committee members can look at the situation and provide assistance and guidance to make sure that the case is cautiously and comprehensively studied and analyzed. In addition, to effectively understand the situation of handling any case, the FTC's control mechanism for accepting and handling cases should be strengthened in order to control all investigation procedures in accepting and managing cases and regularly review them.