Trade-Van Information Services Co. and Universal EC Inc. respectively filed a complaint to accuse each other of violating the Fair Trade Law

Chinese Taipei

Case:

Key Words:

Internet services for customs clearance, loyalty discount, comparative advertisement

Reference:

Fair Trade Commission Decision of February 24, 2005 (the 694th Commissioners’ Meeting); Disposition Kung Chu Tzu No. 94017 and Disposition Kung Chu Tzu No. 94018

Industry:

Customs Clearance Services (5720)

Relevant Laws:

Article 10 and Article 24 of the Fair Trade Law

Summary:

This case originated from the complaints respectively filed by Trade-Van Information Services Co. (hereinafter referred to as “TVIS”) and Universal EC Inc. (hereinafter referred to as “Universal EC”) accusing each other of violating the Fair Trade Law. TVIS was accused of being engaged in competition restraint, such as employing improper loyalty discount to restrain the users from trading with its competitors, refusing to connect with other networks, establishing unreasonable rate for network connections, and refusing its competitors to use the EDI standard format. Universal EC was accused of being engaged in unfair competition, such as disseminating untrue comparative advertising flyers, improperly acquiring another person’s business secrets, and improperly contesting for trading counterparts with low prices.
Upon the investigation and the Decision of February 24, 2005 (the 694th Commissioners’ Meeting), dispositions were made. Grounds for dispositions are as follows:
(1) TVIS assumed the business and assets from the Clearance Automation Unit. It is an incumbent Internet operator for the customs clearance market. There are nearly 3,000 operators of customs clearance service and transportation connected with TVIS, including many shipping and cargo transportation businesses. Also, the Internet services for customs clearance is a mature and stable industry. The market is limited in size and is characterized as having “network externality” and “two-sided market.” Users tend to join networks with the largest customer base and the most types of services. As an incumbent operator, TVIS has the advantages of first mover, customer base, market share, network externality and two-sided market. TVIS obviously has the advantages of competition over Universal EC and is able to eliminate the competition. TVIS shall be considered as a monopoly as set forth in article 5 of the Fair Trade Law.

(2) During January 2003, TVIS promoted a “preferential plan for customs clearance Internet services,” which ended on December 31, 2003. The preferential project had A and B programs. Under B program, if a customer promises to use exclusively TVIS’s customs clearance Internet services, the customer could have a 60% discount (i.e., peak hour: NT$ 4.5 off-peak NT$ 2.79/1000 characters). If the participating businesses fail to keep the promise, TVIS has the right to terminate this preferential program and may collect the difference between the preferential amount paid and the original rate. Upon the investigation, this Commission found that over 80% of the users chose to participate in the B program. If these users wished to switch to Universal EC within one year after participating said program, they had to bear the difference between the preferential amount paid and the original rate as the penalty. The cost of switching trading counterparts increased and the degree of inducement for the users to switch to Universal EC therefore decreased. An entry barrier was formed for entering the market of customs clearance Internet services for Universal EC. Such an action “directly or indirectly prevented by unfair means any other enterprises from competing” and therefore violated Article 10 of the Fair Trade Law. This Commission imposed an administrative fine of NT$ 1,500,000 in accordance with Article 41 of the Fair Trade Law.

(3) Universal EC joined the market of customs clearance Internet services in early 2003. Its salespersons issued flyers to TVIS’s trading counterparts. These flyers had the trademark of Universal EC and bore the words “Universal EC Inc” along with “Comparison of Universal EC and Present Operator,” which compared Universal EC with a “T Operator.” Since there are only two customs clearance Internet operators on the market and the English abbreviation of Trade-Van Information Services Co. is “Trade VAN,” it can be specified that said “T Operator” in the comparison shall refer to TVIS. With regard to “connection method/connection speed” and “system backup” compared in the flyers in question, Universal EC unilaterally employed incomplete information or different bases to compare the two companies and failed to disclose the actual bases of the measurement. Universal EC also claimed that it was overall superior to the compared target based on partially superior factors to cause the trading counterparts of TVIS to have mistaken knowledge regarding the services provided by TVIS. Thus, such an action is obviously unfair and sufficient to affect trading order in violation of Article 24 of the Fair Trade Law. This Commission therefore imposed an administrative fine of NT$ 200,000 in accordance with Article 41 of the Fair Trade Law.
As for other matters complained in this case, since the “Regulations Governing the Operating Permit of Customs Clearance Network” enacted and promulgated by the Ministry of Finance are also involved, this Commission, in accordance with Article 9 of the Fair Trade Law, requested the Ministry of Finance to amend the aforesaid regulations by adding relevant obligations such as network connections, rate control, and opening up the EDI standard format. With the amendments, an open environment for the competition of the customs clearance network market will be established.

Summarized by Liao, Hsien-Chou
Supervised by Hou, Vn-Hsien

Appendix:

Trade-Van Information Services Co.’s Uniform Invoice Number: 97162640
Universal EC Inc.’s Uniform Invoice Number: 23997652

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