The concerted action of Sheng Ch'i Co., Ltd., He Wei Broadcasting Co., Ltd., Mu Ch'iao CATV Co., Ltd., ERA Communications, Ltd., and Gala International, Ltd.
Case:
The concerted action of Sheng Ch'i Co., Ltd., He Wei Broadcasting Co., Ltd., Mu Ch'iao CATV Co., Ltd., ERA Communications, Ltd., and Gala International, Ltd.
Key words:
termination of program signals, system operators, cable programming providers
Reference:
Fair Trade Commission Decision of June 15, 2000 (the 449th Commissioners' Meeting); Disposition (89) Kung Ch'u Tzu No. 106
Industry:
Television program broadcasting industry (8530)
Relevant laws:
Articles 7 and 14 of the Fair Trade Law; Article 5(1) of the Implementing Rules to the Fair Trade Law
Summary:
1. A dispute over the channel authorization contract for the year 2000 between Kaoshiung's cable television system operators and cable programming providers had led to termination of program signals on the cable systems of Ta Shinn CATV Ltd. (Ta Shinn), Feng Hsin Cable Broadcasting System Company, Ltd. (Feng Hsin), Ch'uan Hsin Hang Cable Broadcasting System Company, Ltd. (Chuan Hsin Hang) by their cable programming providers. The fact that cable subscribers' rights were greatly compromised prompted the Fair Trade Commission (the Commission) to initiate an investigation into the abovementioned system operators and cable programming providers, namely Sheng Ch'i Company, Ltd. (Sheng Ch'i), He Wei Broadcasting Company, Ltd. (He Wei), Mu Ch'iao Broadcasting Company, Ltd. (Mu Ch'iao), ERA Communications (originally Era Film Ltd.), and Gala International. (Gala). 2. The Commission investigated and found that Sheng Ch'i, Mu Ch'iao, He Wei, ERA, and Gala jointly decided to conduct concerted action against Ta Shinn, Feng Hsin, Ch'uan Hsin Hang: (1) The channel authorization price that cable programming providers charge system operators is produced by multiplying the purchase price of individual channels by the number of cable television subscribers. It is clear that negotiation on individual channel purchase prices and the number of subscribers will influence the final aggregate authorization price. (2) At around 20 December 1999, Lien T'ai-sheng, general manager of Sheng Ch'i, representing Sheng Ch'i, Mu Ch'iao, He Wei, ERA, and Gala (cable programming providers), negotiated the number of subscribers with Jen Hui-kuang, general manager of Feng Hsin, representing system operators. The cable programming providers (that is, Sheng Ch'i, Mu Ch'iao, He Wei, ERA and Gala) proposed to put all channels in a package and set the price for the package at NTD 220 per subscriber. However, the two sides could not reach a consensus on the total number of subscribers. Also the system operators proposed to buy individual channels instead of a whole package and they were not satisfied with the authorization price for individual channels. For these reasons (among others), the two sides could not reach an agreement upon year's end. Then, from 1 January 2000 on, program signals on the cable systems of Ta Shinn, Feng Hsin, and Ch'uan Hsin Hang were terminated. It was not until 6 January 2000 that Jen Hui-kuang, repres enting the system operators, and Lien T'ai-sheng, on the cable programming providers' behalf, reached an agreement on the number of subscribers. The cable programming providers jointly decided that the price for the package of all channels would be NTD 220 per subscriber and that they would adopt the number of subscribers that Mr. Lien T'ai-sheng negotiated on their behalf. When asked by system operators the prices for individual channels, cable programming providers responded by saying that the total amount of aggregated individual prices was higher than NTD 220, which they described as a "sale price," leaving system operators no choice but to buy the whole package. Also according to cable programming providers' 1999 channel sales records, system operators were able to reach agreements separately with cable programming providers on the number of subscribers; while for the year 2000, cable programming providers commissioned Mr. Lien T'ai-sheng to negotiate a common number of subscribers, thus setting limits on individual cable programming providers' methods of pricing. This action of the cable programming providers limited the ability of individual operators to sell channels independently, qualifying as "mutual restraint of business activities." (3) Relevant facts proving cable programming providers participation in a "joint decision": (i) The general manager of Feng Hsin, Jen Hui-kuang, representing system operators, reached a consensus with Lien T'ai-sheng, general manager of Sheng Ch'i, representing cable programming providers, on the number of subscribers and the channel authorization price, which was determined to be NTD 220 per subscriber. Feng Hsin later issued a voucher in compliance with each of the cable programming providers' wishes without further negotiating an authorization price with individual cable programming providers. (ii) Mr. Jen Hui-kuang, general manager of Feng Hsin, said that he invited all cable programming providers to discuss their respective authorization prices. But even given the most favored discount (calculation according to scale of operation) and advertisement feedback rates (among others), system operators had to pay Sheng Ch'i NTD 83.7 [per subscriber]; He Wei, NTD 70.85; Mu Ch'iao, NTD 89.6; ERA, NTD 57; and Gala, NTD 19.87 for authorization of all channels, totaling NTD321.02 - far higher than the NTD 220 that Mr. Lien had offered on the cable programming providers' behalf. For this reason, until they finally yielded to Mr. Lien on 6 January 2000, system operators had not purchased any individual channels. (iii) Only Ta Shinn of Kaoshiung City and Feng Hsin and Ch'uan Hsin Hang of Kaoshiung County suffered signal termination, although Kuan Tien Hsia of Taipei County was among the system operators represented by Mr. Jen Hui-kuang in the channel authorization negotiation. (iv) The date sealed on the channel authorization agreement of Sheng Ch'i, Mu Ch'iao, Gala, and ERA, and the initial date of authorization of He Wei were both 6 January 2000. (v) Having learned that other cable programming providers were going to terminate program signals, Mu Ch'iao went along with the plan; while ERA confirmed that Mr. Lien had requested ERA to terminate its signal on 31 December 1999. To sum up, the Commission believes the cable programming providers jointly decided the price for authorization of the whole package of all channels to be NTD 220 and to share the authorization fees collected. They also forced acceptance of their price by jointly imposing signal termination on system operators in Kaoshiung and setting a higher price than NTD 220 if operators chose to buy individual channels. 3. The Fair Trade Commission believes the cable programming providers' concerted sales action had detrimental effects on the cable television market order. Some of the channels such as CTN, ETTV and TVBS-N news channels that He Wei, Mu Ch'iao, ERA and Gala provide are of the same nature and basically interchangeable. The concerted action thus reduced competition among the providers and affected the market's normal functioning in terms of demand and supply. Furthermore, there are only a limited number of channels available (about 75 channels) for cable television operators. The cable programming providers provide a total of 52 channels (45 excluding free channels), which comprise almost 70% of the available channels - with Sheng Ch'i providing 14 channels; ERA (sold through its agent Sheng Ch'i), seven (including two free channels); He Wei, 9 channels; Mu Ch'iao, 19 channels (including five free channels); and Gala, 3 channels. If system operators are required to buy all channels in a package, they w ill be left with a greatly reduced number of channels available, threatening the survival of other competitive channels. Having taken a large share of system operators' budget for channel purchasing, the concerted action squeezed out other providers' chances by leaving them with a reduced share of the budget, since that budget, made up from subscription fees that are subject to approval of municipal governments, is understandably limited, thus undermining the reasonable interests of their competitors. The failure to reach an agreement on authorization at the end of 1999 led to unilateral termination of program signals, beginning from 1 January 2000, on the operators' cable systems. The rights of from 100 to 200 thousand subscribers were severely compromised, and this is an undeniable fact. Most of the channels of the providers were on Ta Shinn's, Feng Hsin's, and Ch'uan Hsin Hang's 1999 broadcasting list, and this served as a reference for their respective municipal governments in determining subscription fe es. The fact that Sheng Ch'i negotiated authorization affairs on all cable programming providers' behalf undermined the ability of individual system operators to negotiate prices. To sum up, their concerted action effectively undermined the function of supply and demand and was in violation of Article 14 of the FTL. The FTC has fully considered the motivation and purpose of their violation, foreseen unjust enrichment, the duration of disruption in the market order, the status quo of operations, market placement, and their willingness to comply with the FTC's investigation. The cable programming providers shall be penalized pursuant to Article 41 of the Fair Trade Law. They shall discontinue the concerted action from the day after this notice is served and pay fines of NTD 9 million, 8 million, 8 million, 4.5 million, 1.5 million, by Sheng Ch'i, He Wei, Mu Ch'iao, ERA, and Gala, respectively. Appendix: Sheng Ch'i Company, Ltd.'s Uniform Invoice Number: 16140251 He Wei Broadcasting Company, Ltd.'s Uniform Invoice Number: 97318989 Mu Ch'iao Broadcasting Company, Ltd.'s Uniform Invoice Number: 86162046 ERA Communications, Ltd.'s Uniform Invoice Number: 05091991 Gala International, Ltd.'s Uniform Invoice Number: 97468608 Summarized by Yeh Su-yen; Supervised by Hu Kuang-yu