The sales network of Yamaha motorcycle violated the Fair Trade Law for restricting and penalizing trans-territory sales by its downstream distributing enterprises
Chinese Taipei
Case:
The sales network of Yamaha motorcycle violated the Fair Trade Law for restricting and penalizing trans-territory sales by its downstream distributing enterprises
Key Words:
cross-territory sales
Reference:
Fair Trade Commission Decision of November 3, 1999 (the 417th Commissioners' Meeting), Dispositions (88) Kung Ch'u Tzu No. 140 and (88) Kung Ch'u Tzu No. 141
Industry:
Motorcycle Wholesale (5262)
Relevant Laws:
Articles 19 (vi) of the Fair Trade Law
Summary:
Investigation by the Commission
has discovered the following facts:
(1) As a company in charge of guiding and supervising the general agents
and sub-agents in both the city and county areas, Ch'un Shan Co. was also
responsible for the coordination and enforcement of the Regulations. In
June 1998, based on a report filed by Ta Yeh Co., Ch'un Shan made the decision
that the agent in Tainan county had sold Yamaha motorcycles to a retailer
in Tainan City in violation of the Regulations and should be fined NT$10,000
as a rebate. He Yeh Co. was instructed to enforce the decision. Moreover,
the executive officer of Ch'un Shan Co. always gave oral briefings on the
Regulations and its penalty provisions while appearing at shareholders meetings
of the general agents of various counties and cities and at local industry
association meetings.
(2) A motorcycle agent would in principle have to set its sales prices lower
than those in a consumer's home territory to effectively induce cross-territory
purchases. Therefore, apart from the delineating of sales territories, the
fundamental purpose of the Regulations is to restrict price competition
between agents in different counties/cities so that they cannot vie for
each others' customers by price or service competition.
(3) Included in the sales incentive program of Yamaha are three types of
incentive-creating design: commission, bonus, and sales reward. Various
levels of rewards would be granted based on the percentages the sales targets
have been achieved. In order to increase its sales volume and thereby to
receive higher bonus and reward, the sales agent in Tainan county sold its
motorcycles at lower prices to buyers located at other counties/cities to
secure more business opportunities. Although its sales prices in territories
outside its own were set slightly lower than (or the same as) the costs
of the products, the differences were subsidized by the gains from the increased
bonus and reward, and no losses had occurred to the sales agent.
(4) The following are all employees of Yamaha Motor Taiwan Co., Ltd. ("Yamaha
Taiwan") and are responsible for the business activities of Ch'un Shan
Co., Ta Yeh Co., and He Yeh Co.. Respectively, they are Ch'un Shan Co. section
chief Chang Chien-lu and executive officer Chang Ch'ing-te; Ta Yeh Co. assistant
manager Chou Hsien-hsi; He Yeh Co. assistant manager Hsieh Cheng-hsiung.
Although neither Yamaha Taiwan nor Ch'un Shan Co. has held any stock issued
by the general agent, yet Yamaha Taiwan is a corporate shareholder of Ch'un
Shan Co. and holds 45% of its stock. Also, Chang Chien-lu and Chang Ch'ing-te,
the de facto directors and executors of Chun Shan Co.'s business activities,
both held higher positions in the Yamaha Taiwan than Ta Yeh Co.'s Chou Hsien-hsi
and He Yeh Co.'s Hsieh Cheng-hsiung.
By restricting trans-territory sales by the downstream agents in Yamaha Taiwan's distribution network and imposing fines on those who violated the restriction, the behavior of the three enterprises under investigation, Ch'un Shan Co., Ta Yeh Co., and He Yeh Co., have constituted improper restrictions on the business activities of trading counterparts as a condition of trading in a way that it could impede fair competition. Hence, it is condemnable under Article 19(vi) of the Fair Trade Law. In addition, activities by staffs from Yamaha Taiwan dispatched to the three enterprises to monitor the enforcement of the trans-territory sales policy were unlawful acts derived from the performance of their jobs; accordingly, Yamaha Taiwan itself should also be treated as a party to the unlawful arrangement. Since its act also has the potential to impede fair competition, it is punishable under Article 19(vi) of the Fair Trade Law as well. As the violations occurred before the amended Fair Trade Law took effect on February 5, 1999, this disposition was made pursuant to the fore part of Article 41 of the pre-amendment law.
Summarized by Lin Ch'ing-t'ang;
Supervised by Ma T'ai-ch'eng
Appendix:
Yamaha Motor Taiwan Co., Ltd.'s Uniform Invoice Number: 22318608
Ch'un Shan Co., Ltd.'s Uniform Invoice Number: 22674768
Ta Yeh Co., Ltd.'s Uniform Invoice Number: 89995058
He Yeh Co., Ltd. 's Uniform Invoice Number: 89985615