United Daily News Co., Ltd. was alleged in violating the Fair Trade Law for the content of its standardized distribution agreement and for its termination of the distribution agreement
Case:
United Daily News Co., Ltd. was alleged in violating the Fair Trade Law for the content of its standardized distribution agreement and for its termination of the distribution agreement
Key Words:
distribution agreement, free gift giveaways
Reference:
Fair Trade Commission Decision of June 28, 2001 (the 503rd Commissioner's Meeting)
Industry:
Newspaper Publishing (8310)
Revalant Laws:
Summary:
1. The complainant in this case alleged as follows: The provisions of the standardized distribution agreement used by the United Daily News Co., Ltd. (UDN) for decades permitted UDN to revoke the distribution rights of distribution companies at any time or arbitrarily reduce the number of newspapers provided to a given distributor for re-assignment to another distributor without providing any form of compensation to the distributor for their loss. In addition, UDN conducted frequent promotions involving free gift giveaways and free trial subscriptions for new subscribers. Distributors were forced not only to deliver newspapers at a lower price but had to absorb the costs of these promotions themselves lest they face revocation of the distribution rights by UDN under the provisions of Article 7 of the distribution agreement. Thus the distribution agreement is clearly an "unconscionable contract" and UDN's use of the agreement is in violation of the Fair Trade Law (FTL). 2. On 4 December 2000, UDN sent Letter Ref. (89) Lien Fa Tzu No. 88534 declaring invalid a third-party distribution agreement the complainant had executed with another distributor and terminating the distribution agreement with the complainant because the complainant had not received UDN's authorization to execute the third-party distribution agreement. In an appearance before the Fair Trade Commission (FTC), the complainant admitted that a third-party distribution agreement had been executed for the period from April through July 2000. In addition, when UDN terminated the distribution agreement with the complainant, only those subscribers on the complainant's route who had pre-paid newspaper subscriptions were turned over to another distributor for delivery. The complainant was able to keep all business that had been unilaterally developed. Thus, UDN did not adversely affect the trading order by benefiting from the fruits of the complainant's labors as a result of the termination of the distribution agreement. Following termination of the distribution agreement, the complainant continued to operate a delivery route of more than 100 United Daily News subscribers. Consequently, UDN's actions in terminating the distribution agreement cannot be considered obviously unfair or a violation of the relevant provisions of the FTL. 3. The distribution agreement in question was freely, knowingly, and voluntarily entered into by both parties. It contains no hidden clauses, and any contested matters are of a civil law contract nature. Distributors provide only newspaper delivery services for UDN. Under the terms of the distribution agreement, UDN may consider changes in the operations environment and the distributor's operating efficiency in terminating the distribution agreement and reclaim the subscriber list it originally gave to the distributor for delivery. As such, it is difficult to determine that the aforementioned provisions would have the effect of limiting the distributor's business activities, impeding fair competition, or restricting competition in violation of Article 19(vi) of the FTL. In addition, with respect to cooperation with free gift giveaway promotions, such gift giveaway and free trial subscription promotions fall in the category of free business operations and as the complainant is a distributor for UDN, the distributor should cooperate with such activities. There is no specific evidence of non-cooperation in the giveaway promotion or the low-priced delivery of free trial subscriptions. Whether such matters constituted an infringement of the rights of the complainant should be decided under civil law or other legal means. Appendix: United Daily News Co., Ltd.'s Uniform Invoice Number: 03799802 Summarized by Hsu, Cho-Yuan; Supervised by Cheng, Chia-Ling