Lee Min Optical Co., Ltd. continued to restrict the resale price of its "gold double oxy" contact lens cleaning fluid in violation of Article 18 of the Fair Trade Law despite having been ordered to cease the act in a disposition made by the Fair Trade Commission, dated October 9, 1996
Case:
Lee Min Optical Co., Ltd. continued to restrict the resale price of its "gold double oxy" contact lens cleaning fluid in violation of Article 18 of the Fair Trade Law despite having been ordered to cease the act in a disposition made by the Fair Trade Commission, dated October 9, 1996
Key Words:
gold double oxy, maintaining resale price, cutting-off supply
Reference:
Fair Trade Commission Decision of December 29, 1999 (the 425th Commissioners' Meeting); Disposition (89) Kung Chu Tzu No. 010
Industry:
Other Chemically Engineered Products Manufacturing Industry (2290)
Relevant Laws:
Article 18 of the Fair Trade Law
Summary:
1. Background: Lee Min Optical Co., Ltd. ("Lee Min") restricted the resale price of its "gold double oxy" contact lens cleaning fluid in violation of Article 18(1) of the pre-amendment Fair Trade Law (FTL). The Fair Trade Commission (the Commission) ordered Lee Min to immediately cease the act upon the second day of receiving the disposition ref.: (85) Kung Chu Tzu No. 159, dated 9 October 1996. However, Lee Min continued to maintain the resale price resulting in further public complaints. 2. The Commission found that of the purchase and sale prices of 12 retailers, except for one retailer who declared a purchase and sale price of NT$210 and NT$230 respectively, 11 were consistently priced at NT$220 (before taxes) and NT$250 respectively. Nine retailers said Lee Min required or suggested a price of NT$250 and four said it threatened to cut-off supply if the products were not sold for NT$250. Two retailers said Lee Min would increase quantity supplied if the retailer did not compete on price. Supply was cut off to two others for selling below NT$250. Lee Min set a minimum resale price of NT$250 for the products and used compliance measures to restrict trading behavior. They included directly communicating the required price, cutting off supply, providing bonuses, increasing quantity supplied, and preempting sourcing from other suppliers by identifying the goods with serial numbers. Lee Min also used a commission model in addition to its basic distribution approach to sales, although the Commission found that the real purpose of the commission agreements was maintaining the minimum resale price of NT$250, not making commissions. 3. According to Article 18 of FTL, "Enterprises shall allow trading counterparts to decide freely the prices at which such goods will be resold by the said third party; any agreement to the contrary is void." The legislative intent of the provision considers that when upstream companies restrict resale prices, downstream companies are deprived of the right to freely decide their prices. This also has the effect of restricting competition in the distribution channel which has negative effects on market competition and therefore is not permitted. The Commission also found that based on the investigation conducted in June and July, 1999, which was after February 5, 1999 when the amendment to FTL took effect, Lee Min had continued to commit the acts. The Commission imposed a fine of NT$1 million and ordered Lee Min to immediately cease the acts pursuant to Article 41 of FTL. Appendix: Lee Min Optical Co., Ltd.'s Uniform Invoice Number: 05124536 Summarized by Lin Hsiao-hung; Supervised by Lin Yen-hsi