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:

  1. The Tainan City Yamaha sales agent T'ung Ta Motorcycles filed a report with the Yamaha general agent Ta Yeh Co. claiming that a certain motorcycle sales agent based in Tainan County had sold Yamaha motorcycles to a motorcycle retailer in Tainan City on 29 April 1998. Ta Yeh Co. and Yamaha's management company for the Southern Yunchia region - Ch'un Shan Co. - subsequently wrote up a report alleging that Ming He Motorcycles had violated the Management Regulations Concerning Cross-City/County, Cross-Territory Price Cutting ("the Regulations") and a fine of NT$10,000 was imposed accordingly. Also, to restrict the sale regions of the downstream sale agents affiliated with He Yeh Co., Ch'un Shan Co., at a shareholders' meeting of He Yeh Co. held on June 24, 1998, reiterated the Regulations and its penalty provision under which a fine of NT $10,000 and a 10% capital reduction (referring to the local agent's investment in the stock of the general agent) would be imposed for the first violation of the Regulations; a second violation of the Regulation would trigger a fine of NT$10,000 and a 20% capital reduction ; and for the third violation of the Regulation, the agency right would be revoked.

  2. 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.

  3. 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


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