Taipei City,Taiwan and Kaohsiung Architects Associations uniformly set remuneration standards,a suspected act of concerted actions

Chinese Taipei

Case:

Key Words:

architect,list of the ceiling and floor of remuneration standards,concurrent application of laws

Reference:

Fair Trade Commission Decision of February 3,2005 (the 692nd Commissioners' Meeting)

Industry:

Architectural and Engineering Technical Services (7000)

Relevant Laws:

Article 7 ,Article 14 and Article 46 of the Fair Trade Law

Summary:

Taipei City,Taiwan and Kaohsiung City Architects Associations respectively determined the remuneration standards for architects and fee standards for various application services in the general meetings of members and board of directors meetings. Thereafter,the affiliated members,through the associations' charters,are restrained from lowering remuneration to compete with other members. The 583rd Commissioners' Meeting held on January 9,2003 made a resolution that the aforementioned conducts fell under the definition of "concerted action" described in Article 7 of the Fair Trade Law and therefore were in violation of the provision that no enterprise shall have any concerted action as stipulated in Article 14 (1) of the same Law. The disposition of the aforesaid violation is on the record. However,the aforementioned associations are not convinced with the aforesaid dispositions and thus have filed appeals with the Executive Yuan. The Appeal Commission of Executive Yuan rescinded the original disposition and ordered that this Commission re-dispose the issue in accordance with the law.
Upon the investigation,it was found that the Architect Associations,except for the design and construction supervision fees,had already canceled the standards for various application charges. The remuneration standard for architects in question was based on the upper and lower limits of remuneration computed on the basis of a certain percentage of the total project cost. Taking an example of a total project cost that is less than NT$ 3 million,the remuneration for "regular buildings" shall not exceed 9.0% or below 5.5%; the remuneration for "public buildings and high-rise buildings" shall not exceed 9.0% or below 6.0%; the remuneration for "special purpose buildings" shall not exceed 9.0% or below 7.0%. The aforementioned standard is one type of concerted actions to restrict the trading prices. The competing enterprises' agreement on the charges standards for the total price is a conduct of restraining market competition. The stipulated floor price will not only cause the trading counterparts to pay the minimum charges,but also inhibit the architects' pursuit of economic efficiency and better service quality due to the protection of the minimum remuneration. The stipulated ceiling price,on the other hand,eliminates the architects' incentives to provide high quality services,and deprives the trading counterparts of the power to request for better architect design. Hence,the aforementioned upper and lower limits of remuneration standards not only forfeit the trading counterparts' choices; but also cause no benefits to the competition and efficiency of the architectural service market. The mechanism of upper and lower limits of remuneration standards and that of agreeing on a specific remuneration amount are subject to the same legal censure, i.e.,concerted actions condemned by the Fair Trade Law,for they restrain competition of the market.
Secondly,the effect of the concerted action upon the market functions is based on whether such an action is "sufficient" to affect the market function, meaning that there is a fairly reasonable likelihood to affect the market function. It needs not be based on whether the market function is actually affected or not. Several judgments of administrative courts have held that the constitution of concerted actions is not affected even though a small number of enterprises are not restrained (refer to High Administrative Court's judgment Pan-Tzu No. 407 in 1999 and judgment Pan-Tzu No. 507 in 2001). Also, the constitution of concerted action is unrelated to whether the party concerned has obtained actual benefits (refer to High Administrative Court's judgment Pan-Tzu No. 3245 in 1999) or whether the actual deal prices are uniform. A concerted action may be found where the competing enterprises have an agreement on restraining competition,which is sufficient to affect the market function (refer to High Administrative Court's judgment Pan-Tzu No. 1316 in 2001). Furthermore,since the association's action of regulating its members' business was collectively taken by the members,the effect on the market competition is beyond doubt. The investigation found that nearly 80% of the architects had either followed or referred to architects' remuneration standard list when charging construction companies and nearly 40% of the actual remuneration payments were within the limits of architects' remuneration standards. As a matter of fact,the disputed remuneration standard is of restraining effects that were deemed sufficient to influence the supply and demand of the architectural service market.
The architect associations set the disputed remuneration standard pursuant to Article 37 (1) of the Architect Law and reported to the Ministry of Interior for approval in accordance with the law. There is an issue of concurrent application of laws as it also relates to the determination of whether there is concerted action as defined in the aforementioned Fair Trade Law. In accordance with Article 46 of the Fair Trade Law,this Commission reviewed whether the aforesaid other laws had "met legislative purpose and explanation of the Fair Trade Law" and determined the applicability of the Fair Trade Law. Article 37 of the Architect Law as quoted in this case was enacted in 1969. At that time, the legislative purpose of the Architect Law had only considered whether the amount charged by architects will affect the citizens' economic life and did not take into account the market's fair competition and the impact of the aforesaid Law on the demand and supply functions of the market. As of today, the conducts of architect associations uniformly determining the remuneration standards were sufficient to impede the freedom and fairness of competition, the price competition mechanism was distorted. Thus,said conducts constituted a prohibited concerted action under the Fair Trade Law. Moreover,in accordance with the intent of Article 46 of the Fair Trade Law,the aforementioned concerted action cannot be exempted from the provisions of the Fair Trade Law.
Based on this Commission's years of experiences in the administration and reform of professional service markets,in order to attain the policy goal of promoting market competition,the position and collaboration of the competent authority in charge of such professional services is the key of success; whereas the disposition of this Commission is less important. As for the present case of remuneration standards set by architect associations,the competent authority, the Ministry of Interior,still affirm the need of remuneration standard. Under this circumstance,even if this Commission makes dispositions,the policy goal still cannot be attained. Therefore,for the sake of consistency and courtesy among administrative agencies,this Commission treats the present case as a special one and temporarily dismissed the case pending a better solution on the issue of concurrent applications of laws. However,in order to avoid law violation again,this Commission still send letters to the aforementioned associations requesting them to study and submit a report that has included competitive mechanism in the remuneration standards to the Ministry of Interior. In addition,this Commission also will attend the occasions of drafting and amending the Architect Law to properly elaborate its position,and suggest the omission of Article 37 (1) of the Architect Law that empower the architect associations to determine remuneration standards,hoping to ultimately solve conflict between the industry policy and competition policy.

Summarized by Hung,hsuan

Supervised by Tai,pei-yi

Appendix:

Taipei Architects Association
Taiwan Architects Association
Kaohsiung Architects Association

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