Thirty eight domestic financial institutions filed an application for approval of concerted action on service operations of IC card distribution points
Chinese Taipei
Case:
Thirty eight domestic financial institutions filed an application for approval of concerted action on service operations of IC card distribution points
Key Words:
IC cards, concerted action
Reference:
Fair Trade Commission Decision of January 12, 1994 (the 119th Commission Meeting), April 30, 1997 (the 140th Commission Meeting), and the 287th Commission Meeting; Decisions of (83) Kung Lien Tzu No. 001 and (86) Kung Lien Tzu No. 007
Industry:
Financial Industry (6500)
Relevant Laws:
Summary:
1. The Chang Hwa Commercial Bank, Ltd. applied to the Commission in June 1993 on behalf of 38 domestic financial institutions for their concerted actions relating to service operations for IC card distribution points. Items contained in the application include: (1) a joint clearing center, (2) jointly setting fees charged to IC card holders and the terms therefor, (3) jointly determining specifications for peripheral equipment such as IC cards and cash registers for exclusively contracted stores, and (4) jointly setting terms of agreements executed with specially contracted stores.
2. The Commission has approved and rejected certain items for the following reasons:
(1) Approved Items and Reasons:
(i) Joint Clearing Center:
Since service operations for IC card distribution points are extensions of existing automatic teller services of each bank, interbank transactions require the functions of a clearing center. Currently, there are five different cards under three card issuing systems in the credit card market. The Joint Credit Card Processing Center holds a share of about 60% of the market, indicating the existence of a concentrated market. Establishment of a joint clearing center for IC cards will promote competition, improve fee collection and services, in line with the requirements of Article 14(2) of the Fair Trade Law, which stipulates that "joint product or market research and development for upgrading technology, improving quality, reducing costs or improving efficiency shall be approved." Therefore, this item is approved.
(ii) Jointly determining specifications for peripheral equipment such as IC cards and cash registers of specially contracted stores:
This concerted action conforms with the objective of achieving overall economic benefits for Taiwan and has no adverse effect on relevant trading counterparts. Therefore, it satisfies with the requirement under Article 14(1) of the Fair Trade Law, which provides that "unified product specifications or models for cost reduction or quality or efficiency improvement shall be approved." As a result, such action is approved.
(iii) Jointly setting terms under agreements executed with card holders governing exemption of liability in case cards are stolen:
This concerted action is intended to prevent malicious use of cards by card holders and does not undermine the rights and interests of bona fide card holders. In addition, initial liability is determined by taking into account the maximum duration for processing a report of a missing card in the financial information system. In view of the purpose of safeguarding card holders from any moral liability and of servicing the overall system, such concerted action conforms to the requirement under Article 14(2) of the Fair Trade Law, which stipulates "joint product or market research and development for upgrading technology, improving quality, reducing costs or improving efficiency shall be approved." Therefore, this action is approved.
(iv) The approval items in the application shall be valid until December 31, 1996. The applicant shall be responsible for the following:
(a) In the event of any change to the organization of the Financial Information Service Center (under the Ministry of Finance), which is responsible for the joint clearing system, the applicant should, within one month of such change, submit relevant procedures governing its organization and operations to the Commission for reference.
(b) The applicant may not, based on this approval, engage in other concerted actions or restrict any applicant or anyone from the applicant's organization from joining other credit card issuing organizations, nor may it restrict other enterprises from joining this concerted action. In the event or any addition to, or reduction of, the number of participating enterprises, relevant information regarding the participating enterprises shall be submitted to the Commission for reference.
(c) The applicant may not, based on its market position secured pursuant to this approval, impose inappropriate mandatory requirements, hinder other enterprises from fair competition, or engage in other abuses of its market position.
(2) Rejected Items and Reasons:
(i) Jointly setting of fees charged to card holders:
Since jointly setting fees is not essential for the approved concerted action, such action is not approved for the purpose of promoting competition in the financial markets.
(ii) Jointly setting terms with card holders and execution of contract with standard clauses with specially contracted stores:
Matters relating to jointly setting punitive clauses, other terms and relevant fee standards (such as annual fees for card holders, calculation of interest, interest of any delayed payments, penalties, processing fees for stores under special contracts, installation or use fees or penalties for terminal equipment) with card holders or specially contracted stores, which may undermine market competition, are not approved.
3. Subsequent Developments
(1) With respect to the approval (valid until December 31, 1996) for joint service operations for IC card distribution points, on December 19th, prior to expiration of the approval, the First Commercial Bank submitted relevant documents on behalf of 38 financial institutions to the Commission for extension of the concerted action associated with their service operations for IC card distribution points, and an extension was granted by the Commission.
(2) As for two other approved items, namely the jointly determining specifications for peripheral equipment such as IC cards and cash registers of exclusively contracted stores and exemption from liability for stolen bank cards, the applicant has stated that except for basic computer systems such as language and interfaces which stay the same among the participating banks, the participating banks are free to formulate rules for their exclusively contracted stores and consumers. Since no concerted action is being taken in formulation of specifications or rules, the applicants do not wish to apply for approval.
Summarized by Wu, Pi-ju
Supervised by Hu, Kuang-yu
＠: For information of translation, click here
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