I Purpose of the Study
The most common means by which ordinary consumers obtain PC operating system software is by purchasing a PC on which the operating system software has already been installed. This means that PC vendors are selling not only PC hardware such as the PC itself, the monitor and other input or output devices, but also the pre-installed operating system software. Microsoft's collaboration with PC manufacturers has been an effective method of ensuring the rapid, widespread diffusion of Microsoft operating system software. Chinese Taipei original equipment manufacturer (OEM) companies manufacture over 90% of all PC systems produced worldwide, so every time Microsoft introduces a new version of one of its operating systems, this provides a major boost to Chinese Taipei OEM firms and to companies in related industries. Not content with its profits from operating system software and office software, Microsoft has continued to expand its product line, introducing Windows Media Player, the Internet Explorer browser, MSN Messenger instant messaging software, etc. These software products are usually bundled with the Microsoft Windows operating system; as a result, consumers are more likely to be familiar with these products than they are with those of rival software vendors. However, this bundling of multiple software products with the Microsoft Windows operating system has drawn criticism from rival vendors of media player, Internet browser and instant messaging software, who have lodged complaints with competition regulators accusing Microsoft of behavior that constitutes restriction of competition; as a result, Microsoft has had to deal with a series of anti-trust suits in different parts of the world.
In April – May, 2002, public opinion in Chinese Taipei was aroused by the perceived monopolistic dominance of Microsoft Taiwan in the Chinese Taipei software market, unreasonable software pricing, and inappropriate bundling of Microsoft Office software. On May 2, 2002, Chinese Taipei's Fair Trade Commission (FTC) established the Software Market Monopoly Task Force to investigate the matter, in accordance with the provisions of Article 26 of the Fair Trade Law. Following an investigation that lasted over five months, on October 3, 2002 Microsoft Taiwan wrote to the FTC requesting an administrative settlement. At the 573rd Commissioners' Meeting of the FTC held on October 31, 2002, the FTC agreed in principle to Microsoft Taiwan's request for administrative settlement, and began the negotiation process required for administrative settlement. Subsequently, on February 26, 2003, Microsoft Taiwan submitted a settlement offer to the FTC on behalf of itself and the relevant Microsoft Taiwan affiliates. At the 590th Commissioners' Meeting of the FTC held on February 27, 2003, the FTC decided that the settlement offer submitted by Microsoft Taiwan was in the public interest, and agreed to sign an administrative settlement agreement with Microsoft Taiwan.
Several scholars have noted that, although the FTC has considerable experience with administrative agreements, it has always tended to focus on the procedures leading up to the signing of the administrative agreement and on the terms of the agreement, while giving less attention to ensuring effective monitoring of agreement performance. In the case of Microsoft Taiwan, there was widespread dissatisfaction among the general public regarding the FTC's decision to deal with the matter through administrative settlement rather than an administrative order. The present study appraises Microsoft Taiwan's performance of the administrative settlement agreement, presents an in-depth analysis of the legal basis for administrative settlement, analyses the mechanisms used to supervise performance of the administrative settlement agreement between the FTC and Microsoft Taiwan, and seeks to determine whether the results obtained through administrative settlement were more beneficial than those that could have been obtained through the issuing of an administrative order. It is anticipated that the results obtained in the study will provide a useful reference for the FTC in the future.
II Conclusions and Recommendations
(1) Administrative Settlement is a Vital Tool for the Enforcement of Competition Law:
Competition law serves to regulate market transactions and market competition. Given the rapid pace of change in both market environments and transaction models, and the tendency for anti-trust laws to focus on general principles, competition law is often characterized by a high level of uncertainty, making the collection of evidence of wrong-doing a challenging task. The U.S. was the first country to make use of settlement procedures in the implementation of its competition law; both the Department of Justice and the Fair Trade Commission are authorized to employ settlement procedures. Administrative settlement plays an important role in the implementation of U.S. anti-trust law, with around 70% to 80% of cases being dealt with through administrative settlement. In the European Union, a directive issued in January 2003 emphasized the importance of administrative settlement. Overall, administrative settlement is viewed by the competition regulators of many different countries and regional groupings around the world as being an effective means of settling disputes, one which makes it possible to reduce unnecessary wastage of time, labor and money, while serving both the public interest and administrative goals. Studying the Microsoft Taiwan case alone cannot of course suffice to determine how effective administrative settlement has been in the implementation of the Fair Trade Law in Chinese Taipei. However, judging from the history of administrative settlement in Chinese Taipei, it does appear that administrative settlement can serve as an effective method of implementing the Fair Trade Law, making business enterprises more willing to abide by the provisions of the Fair Trade Law, and thereby helping to strengthen market order and ensure that the public interest is served. The use of administrative settlement can reduce wastage of administrative resources and avoid time-consuming administrative suits and remedies; more positively, it helps to encourage compliance with Fair Trade Law by business enterprises, reduces the frequency of lawsuits pitting international corporations against domestic enterprises, and has brought Chinese Taipei law into line with normal international practice in the area of competition law. All in all, the importance of administrative settlement as a tool for implementing competition law and competition policy would appear to be indisputable.
(2) Open, Transparent Procedures are Very Important:
While administrative settlement can certainly help to improve administrative efficiency, if administrative settlement is undertaken without thorough examination of legal issues and careful determination of the facts of the matter, there is a risk that serious errors may be made. To prevent this kind of situation from developing, in Europe and in the U.S. many administrative agencies have formalized the procedures for administrative settlement, and seek to ensure that all interested parties have the opportunity to express their opinions regarding the draft settlement. In Europe, in the U.S., and in Japan, the procedures used for administrative settlement emphasize the public announcement of settlement terms and the need to ensure that the views of third parties are heard; both of these are seen as constituting an important part of the supervisory mechanism. Regardless of whether judicial review is required, in Europe and the U.S. the procedures for administrative settlement include clear stipulations regarding settlement terms and the items for which public announcement is required. Judicial review is not necessarily considered to be a requirement of the administrative settlement process, but open, transparent procedures are felt to be vital for ensuring public acceptance of settlement results, and the views of third parties are heard and taken into consideration (although with no requirement being placed on administrative agencies to comply with the wishes of third parties). This model was followed in the Microsoft Taiwan case, with a public announcement of the terms of the administrative settlement agreement, and with Microsoft Taiwan being required to publish the administrative settlement results on its Chinese Taipei website. In addition, the FTC subsequently carried out several market surveys so as to achieve effective monitoring of the implementation of the settlement. As a rule, other countries have not laid down uniform procedures for the monitoring of administrative settlement performance; it is usually left up to individual judges to decide whether a monitoring agency should be appointed or performance procedures specified. The experience of other countries in this regard may offer a useful reference for the Chinese Taipei government when implementing administrative settlement in the future.
(3) The Performance of the Administrative Settlement Agreed Between the FTC and Microsoft Taiwan Created a "Win-Win-Win" Situation for Consumers, Business Enterprises and the Government:
The terms of the administrative settlement agreement signed between the FTC and Microsoft Taiwan included provisions to protect the rights of consumers, support the development of the software industry and ensure fair competition. Thanks to whole-hearted performance of the agreement by Microsoft Taiwan and effective monitoring by the FTC, the signing of this administrative settlement agreement was followed by a fall in software retail prices, improved after-sales service, and a general enhancement of consumer welfare. The agreement also created opportunities for companies in Chinese Taipei's ICT sector to utilize source code made available by Microsoft Taiwan in new product development, while creating a licensing environment based on fair competition. While keeping the expenditure of administrative resources to a minimum, the FTC was able to bring about the expansion of a major international corporation's compliance activities to include Chinese Taipei, thereby furthering the adoption of normal international practice with respect to Chinese Taipei in this regard. In this case, therefore, the results of administrative settlement can be deemed to constitute a "win-win-win" situation that benefited the government, business enterprises, and consumers.
(1) Monitoring Mechanisms and Agencies Should be Established with Respect to Administrative Settlement Agreements:
The actions of administrative agencies should be subject to supervision and monitoring by the legislature, the supervisory authorities and the general public, to ensure that their actions conform to the principles of fairness, openness and honesty. There is thus a clear need to establish mechanisms for monitoring the performance of administrative settlement agreements, to ensure that laxness on the part of government agencies does not result in failure to implement agreements properly, and to reassure the general public regarding the purpose and performance of such agreements. Provisions should therefore be incorporated into the Administrative Procedure Law to clearly stipulate the mechanisms to be used in monitoring administrative settlement agreements, and the agencies responsible.
(2) Revision of the Principles Governing the Establishment of Administrative Settlement Agreements by the Fair Trade Commission:
While the Principles Governing the Establishment of Administrative Settlement Agreements by the Fair Trade Commission are in conformity with the requirements of the Administrative Procedure Law, Chinese Taipei's Administrative Procedure Law does not include clear stipulations regarding transparency. Furthermore, the Principles do include a clear stipulation as to what types of information must be made public. In the Microsoft Taiwan case, this resulted in criticism regarding appropriateness of the terms of the administrative settlement agreement. The European Union has followed U.S. practice by clearly stipulating the types of information that must be made public, so that all administrative settlement procedures and results are subject to public scrutiny, thereby reducing the likelihood that government agencies will be unfairly accused of being remiss in the performance of their duties. If the Principles could be revised in such a way that they clearly stipulate disclosure and transparency procedures (possibly with reference to the experience of the European Union and the U.S.), then this would put the use of administrative settlement in fair trade cases on a more formalized basis, while helping to ensure conformity with the principle that administrative actions should be based closely on the law. As to whether the Fair Trade Law should be revised to clarify matters relating to authorization to formulate procedures for public announcement, this would require careful coordination with the Administrative Procedure Law, to ensure effective functioning of the delegation of authority.
(3) The Purpose of the Signing of Administrative Settlement Agreements by the FTC Should be Limited to the Maintenance of Fair Competition in the Marketplace, Focusing on Those Areas Regulated by the Fair Trade Law:
Examination of administrative agreements in the U.S. involving Microsoft shows that such agreements have focused on regulating transaction behavior between Microsoft and its OEM provider and software developer partner companies. The issue of product pricing, which was included in the administrative settlement agreement signed between the FTC and Microsoft Taiwan, is more properly the province of the regulatory authorities for the software industry and of the Consumer Protection Commission. The rise and fall of prices is determined by the combined impact of economic activity in general. If the changes in the price of a particular product are the result of free competition, in which individual enterprises make price decisions based on supply and demand and on their own marketing strategies, then the prices in question result from the operation of the market mechanism, and the FTC should respect them. If, on the other hand, the changes in the price of a particular product are the result of collusion or price-fixing, then this constitutes a violation of the Fair Trade Law, and the FTC should take action in accordance with the provisions of the Law. In the future, therefore, where the FTC enters into an administrative settlement agreement, the agreement should focus on those matters covered by the Fair Trade Law, rather than straying into areas that are the responsibility of the regulatory authorities for particular industries or of the Consumer Protection Commission, which may lead to criticism of the FTC's role.