Complaint that World First Trading Co., Ltd. restrained trade and thereby violated the Fair Trade Law
Case:
Complaint that World First Trading Co., Ltd. restrained trade and thereby violated the Fair Trade Law
Key Words:
territorial restriction, trading counterparts restriction
Reference:
Fair Trade Commission Decision of August 3, 2000 (the 456th Commissioners' Meeting); Decision (89) Kung Yi Tzu No. 8813910-009
Industry:
Coating, Paint, and Related Products Industry (2210)
Relevant Laws:
Article 19(vi) of the Fair Trade Law
Summary:
1. Yi Hsiung Enterprise and Hung-Du Co., Ltd. (Complainants) filed the complaint with the Fair Trade Commission (the Commission) alleging that the respondent World First Trading Co, Ltd. (World First) had violated the Fair Trade Law (the Law) by restricting Complainants' sales territory and trading counterparts in 1999. Founded in 1974, World First is one of Chinese Taipei's leading bottlers of spray paints. Its many product lines include the most popular T'ieh Le Shih products for which are distributors. 2. After statements made by the Complainants before the Commission, and investigation by the personnel dispatched by the Commission to the Complainant's office(Yi Hsiung Enterprise), the followings are analysis regarding the current situation of interbrand competition in the spray paint market and intrabrand competition of the T'ieh Le Shih products. (1)Chinese Taipei's paints and coats market includes a number of product classes, the largest of which is plastic and cement mortar paints (30% market share). Spray and wood paints account for 11 percent of the market. There are approximately 360 registered and an estimated 2000 unregistered paint and coat manufacturers in Chinese Taipei. Those manufacturers tend to be small-and-medium size enterprises and the industry is characterized by intense competition. Despite the availability of a wide variety of products, the manufacturing process is relatively simple, equipment costs are low, and production techniques could easily be acquired from the employees of other manufacturers. Consequently, paint and coat products of various manufacturers are relatively undifferentiated in terms of their quality and purpose of uses. World First's market position is therefore not significant enough to have the potential to "restrict competition or to impede fair competition" as was stipulated in Article 19 of the La w. (2)In recent years, large retailers including Carrefour, Makro, and B& Q have had a significant impact on the marketing channels for coats and paints products. In view of and in response to these changes, they are reasonable business decisions for World First to move to rely more heavily on its direct-sale department and adjust accordingly its current strategies on using independent distributors. . (3)Although World First contractually imposed territorial and trading counterparts restrictions on its distributors, and prohibited cross-section purchases among distributors, retailers in a given sales territory could still place orders with World First directly. It is obvious that the disputed territorial restriction arrangement did not create a completely foreclosed market. The Commission also noted that since the capital and technical requirements for market entry was not high, the industry have attracted numerous underground paint and coating factories. Moreover, there were at least six brands of very similar spray paint products in the market of Chinese Taipei among which there is not only vigorous competition but also a sufficient degree of substitutability. Consumers could always choose among spray paint, cement mortar paint, or oil paints if choices were made on the basis of preference rather than the particular attribute possessed by a specific brand. The restraint of intrabrand competit ion in this case did not constitute restriction of competition or obstruction of fair competition in the paints and coating market. 3. In sum, the existing evidence are insufficient for the Commission to conclude that the imposition by World First of territorial and trading counterparts restrictions on its distributors as a precondition for mutual dealing is a violation of Article 19(vi) of the Fair Trade Law. Summarized by Mai Juei-Li; Supervised by Lin Gin-lan