RT-Mart International Ltd. abuses its relative superior position to improperly charge its suppliers additional fees, an obviously unfair conduct that is sufficient to adversely affect trading order, in violation of the Fair Trade Laws

Chinese Taipei

Case:

RT-Mart International Ltd. abuses its relative superior position to improperly charge its suppliers additional fees, an obviously unfair conduct that is sufficient to adversely affect trading order, in violation of the Fair Trade Laws

Key Words:

distribution business, additional fees, relative advantageous position

Reference:

Fair Trade Commission Decision of May 19, 2005 (the 706th Commissioners' Meeting); Disposition Kung Ch’u Tzu No. 094053.

Industry:

Retail Outlet (4754)

Relevant Laws:

Article 24 of the Fair Trade Law

Summary:

1. The Fair Trade Commission received a complaint against RT-Mart International Ltd. (hereinafter referred to as RT-Mart) from one of its supplier, alleging that RT-Mart took advantage of its superior position and has unilaterally established a standard contract, improperly collected high additional fees from its suppliers, a suspicion of violating the Fair Trade Law.
2. Upon the investigation, the Fair Trade Commission found that RT-Mart has determined various additional fees calculating at a fixed percentage of purchased amount in the contract, in addition to this, the contract also include a clause of “lowest sponsor fee”, that is, the supplier has to pay RT-Mart a minimum amount of additional fees regardless of whether RT-Mart’s actual purchase for the current year has attained the estimated purchase amount.
3. Grounds of disposition:
   
   1. The total sales of RT-Mart in 2003 are more than NT$17.9 billion, a market share of approximately 12.5% in volume retailers market. RT-Mart has been actively opening up business stores since its approval to establish in 1996, until now, the company has more than ten retail outlets, the nation’s top three retail outlets in expanding business stores. The trading amount between the complainant and RT-Mart in 2003 accounted for 44% of its total sales. A comprehensivere view of the comparative business scale and market share of RT-Mart and its suppliers; also the suppliers’ degree of dependence on RT-Mart in trading shows that RT-Mart possesses relative superior position in the market.
      
   2. RT-Mart, without taking into consideration that its suppliers may encounter irresistible causes that lead to sales changes during the year, has collected “lowest sponsor fee” from its suppliers. The suppliers, under the pressure of wishing to continue trading with RT-Mart, have accepted the trading clauses involuntarily. Therefore, regardless of whether the actual amount purchased by RT-Mart has reached the estimated amount; the suppliers have to pay the aforementioned additional fees, seemingly a clause that guarantees the lowest profit for RT-Mart, thus, the aforementioned “lowest sponsor fee” is obviously unreasonable. Also, for some suppliers, the actual sales are not as estimated due to possible over-estimation of market condition and the products are new to the market, or because of supply-cut and shortage that further lead to the estimated sales figures are unattainable. But, RT-Mart will still deduct the lowest sponsor fee from the payments to suppliers at the year-end settlement of accounts. It is more evidence that RT-Mart, in accordance with the estimated purchased amount, has actually collected “lowest sponsor fee” from its suppliers. Although distribution business may charge additional fees from its suppliers, but the said additional fees and the profits of promoted articles must satisfy the principle of “proportionality”. However, according to the clause “lowest sponsor fee” as stipulated in the contract of RT-Mart, the supplier that has poorer sale performance indeed has to pay higher proportion additional fees, exceeding the direct profits that the supplier may earn from the trading, it is difficult to conclude that the additional fees are charged according to the aforementioned principle of “proportionality”.
      
   3. RT-Mart in this case, relying on its relative advantageous position in market, has not considered the actual sales difficulties of its suppliers and charged “lowest sponsor fees” on the basis of the estimated purchased amounts, collecting from its supplier an additional fee that exceeds the direct profit earned from the sales. Such conduct has imposed extra burden on suppliers, increased suppliers’ operating costs and therefore eroded their normal operating profits. Furthermore, RT-Mart takes advantage of its suppliers’ that they are under the pressure of looking forward to maintain the existing business relations, coerces them to bear the aforementioned additional fees and thus impairs the nature of market competition. Such conduct is rebuked by the ethnic of business competition and sufficient to affect the market trading order, in violation of the provision of Article 24 of the Fair Trade Law. Taking into consideration of the motive, purpose of the illegal actions of RT-Mart, anticipated improper profits, the degree and duration of the act’s harm to trading order, duration and the cooperativeness during the investigations, therefore, an administrative fine of NT$1.2 million is imposed on RT-Mart.

Summarized by Chen, Ei-Chen;
Supervised by Chen, Yuhn-Shan

Appendix:
Rt-Mart International Ltd.’s Uniform Invoice Number: 97165560