Kang Erl Shii Healthcare International Corp. was complained for restraining the resale price of goods in possible violation of the Fair Trade Law

Chinese Taipei

Case:

Kang Erl Shii Healthcare International Corp. was complained for restraining the resale price of goods in possible violation of the Fair Trade Law

Key Words:

restrain the resale price of goods, markdown competition, infant milk powder

Reference:

Fair Trade Commission Decision of March 9, 2005 (the 696th Commissioners’ Meeting); Disposition (94) Kung Chu Tzu No. 021

Industry:

Wholesale of Other Food Products and Groceries (4429)

Relevant Laws:

Article 18 of the Fair Trade Law

Summary:

1. The case originated from a complaint filed against Kang Erl Shii Healthcare International Corp. (hereinafter referred to as “Kang Erl Shii”) alleging that said company stipulated in the franchise contract that the contracted pharmacies shall sell the products according to the prices suggested by the company and shall not commence a markdown competition. Also, said company terminated the franchise contract with a down stream pharmacy and ceased the goods supply based on the accusation against the pharmacy of starting a markdown competition by disobeying the give-away rule (no more than one can of milk power as give-away if the customer purchases twelve cans (one case)). The aforesaid action was suspected of violating the Fair Trade Law.
   
2. Upon the investigation, this Commission found that:

   (1) In the old version of contract, Franchise Contract, in 2003 and the new version of contract, Kang Shi Yo Erh Franchise Sales Contract, in 2004, both franchise contracts contained the term that the franchise pharmacies shall sell the goods in accordance with the prices suggested by Kang Erl Shii and shall not commence a markdown competition. In the new version of the contract, said company even appended a product suggestion price list and added clauses of penalty concerning the markdown competition.

   (2) Kang Erl Shii alleged that the administrative personnel of the company was not familiar with the law and mistakenly thought the downstream business, Tai Ta pharmacy, started a markdown competition by not cooperating with the promotion activity. Said personnel therefore issued a letter to terminate the contract with the pharmacy by claiming that the pharmacy did not correct the markdown after being advised by the company. From the aforesaid statement, it was found that if a downstream business was determined having a markdown by the company, the company would issue a letter to terminate the contract with such a downstream business. Whether the downstream pharmacy triggered a markdown competition, or whether the administrative personnel of the company had mistakenly interpreted the action of the downstream pharmacy, shall not affect the constitution of the violation.

3. Ground for disposition:

   (1) Kang Erl Shii violated Article 18 of the Fair Trade Law by stipulating in the Franchise Contract and the Kang Hsi Yo Erh Franchise Sales Contract that the contracted pharmacies must sell products in accordance with the suggestion prices and shall not have a markdown competition, which is to be enforced by a clause of penalty.

   (2) After considering the respondent’s motivation, purpose, and expected improper benefit of the unlawful acts, the degree of the act’s harm to trading order, and market position, this Commission ordered Kang Erl Shii to immediately cease the aforesaid unlawful acts and imposed an administrative fine of NT$ 100,000 in accordance with the fore part of Article 41 of the Fair Trade Law.

Summarized by Lin, Chia-Hua
Supervised by Wu, Bi-Ju

Appendix:

Kang Erl Shii Healthcare International Corp.’s Uniform Invoice Number: 16818324