Joint promotional venture among domestic airlines planned by the Taipei Air Transport Association
Case:
Joint promotional venture among domestic airlines planned by the Taipei Air Transport Association
Key Words:
Airline industry; joint promotional venture
Reference:
Fair Trade Commission Decision of April 26, 2000 (the 442nd Commissioners' Meeting)
Industry:
Airline Industry (6141)
Relevant Laws:
Summary:
1. This case originated in a report in the media, which stated that domestic air fares had increased significantly since the end of 1999 and therefore reduce consumer interest in flying. In addition, in order to prevent continuous losses as seen by the airlines over the previous two years due to increasing fuel prices, the Taipei Air Transport Association has planned a joint promotional venture and invited four airlines-Far Eastern, UNI, TransAsia, and Mandarin Airlines-to participate. Initial plans were for a two-month promotional period beginning 28 April, 2000, during which a drawing that would be held each day and award a free fare card to one passenger who could then use it to travel an unlimited number of times free of charge on domestic flights for a one-year period. 2. Article 7 of the Fair Trade Law provides that "the term "concerted action" as used in the Law means acts where competing enterprises, by means of contract, agreement or other form of consent, jointly decide the price of goods or services, or limit quantity, technology, goods, facilities, trading counterparts, or trading territory with respect to such goods and services, thereby restraining each other's activities." Article 14 further provides that "enterprises shall not act in concert." In addition, Article 5 of the Enforcement Rules of the Fair Trade Law provides that "concerted action under Article 7 of the Law is limited to horizontal concerted action among enterprises at the same stage of production and/or marketing where there would be an impact on the market functions of production, trade in goods, or supply and demand of services . . . Use by an industry association of its charter, a resolution of a member meeting or a directors or supervisors meeting, or other means, to restrict activitie s of enterprises is also considered to be horizontal concerted action as set out in the first paragraph of this article; the actor [in such case] may be a representative of an industry association." In other words, the enforcement of the Fair Trade Law is aimed at encouraging competition and allowing the full function of market mechanism, as well as maximizing the efficient utilization of resources. "Competition," as used in the Fair Trade Law, refers to two or more enterprises in the same market in which compete for trading opportunities by offering advantageous pricing, quality, quantity, service, or other conditions. Therefore individual airlines should themselves determine what pricing and services will best serve their interests, and should not engage in concerted action to restrict each other's trading opportunities in a fashion against the original good intention of the government in opening up air routes for competition by domestic airlines. Had the airlines actually entered into the joint promotiona l venture as described in the media coverage it would have restricted the ability of domestic airlines to independently seek trading opportunities through their own promotional schemes and would have been injurious to market competition. Therefore the Fair Trade Commission determined to investigate this case in accordance with the regulations of concerted action. Summarized by Chen Ei Chen; Supervised by Hu Kuang Yu