Complaint alleging that Golden Communications (Taiwan) Co., Ltd. charged unreasonable trading prices for films to non-chain rental operators, which had constituted improper restriction of the activities of trading counterpart enterprises in violation of the Fair Trade Law
Case:
Complaint alleging that Golden Communications (Taiwan) Co., Ltd. charged unreasonable trading prices for films to non-chain rental operators, which had constituted improper restriction of the activities of trading counterpart enterprises in violation of the Fair Trade Law
Key Words:
business alliance, single-unit license, Blockbuster, chain store
Reference:
Fair Trade Commission Decision of November 1, 2001 (the 521st Commissioners' Meeting)
Industry:
Radio and Television Program Supply Industry (8630)
Relevant Laws:
Summary:
1. In a letter to the Fair Trade Commission (FTC), the complainant, a VCD and DVD movie rental store, alleged as follows: Golden Communications (Taiwan) Co., Ltd., (Golden) a local film distribution agent, used the following trading arrangements: collecting licensing fees via Golden's business alliance and spread evenly the income from movie rental; or issuing single-unit licenses for certain movies (i.e. sold them outright). However, it usually offered the single-unit license arrangement only to chain stores such as Blockbuster, Cine-Asia Entertainment, and Chin Shih Films. Independent movie rental stores either have difficulty obtaining such movies or are charged very high prices. For movies that Golden has served as agent in recent years such as The Kid, Mission to Mars, and Gone in 60 Seconds, a single-unit license VCD was only NT$1,100. For the movie The Accidental Spy, the price was increased to NT$2,500. The price to Blockbuster, however, was only NT$1,041. The purpose of this pricing arrangement was to force non-chain stores to join Golden's business alliance. Hence independent rental stores were being squeezed out of the market.2. With respect to Golden's practice of charging different prices to chain stores such as Blockbuster and independent movie rental stores:(1) After reviewing the trading records provided by Golden, it is the finding of the FTC that discriminatory pricing for single-unit licensing movie such as The Accidental Spy did exist among purchases made by Blockbuster and those by non-chain stores. However, the combined volume of purchases of the movie The Accidental Spy by non-chain stores in Chinese Taipei in the VHS, VCD, and DVD formats amounted to a mere 10 units for each format. Thus, the average purchase volume per non-chain store would be lower still. In contrast, the purchase volume of the same movie by Blockbuster in the same formats was 3,090 units, 860 units, and 1,768 units respectively. Hence Blockbuster's purchases were comparatively far greater than the combined purchases of the non-chain stores.(2) According to statements made by Golden, the trading discounts for its single-unit licensing movies differ, depending on such factors as movie grade, the intervals between movie ordering and releasing time, inventory availability, ordering volume, and distribution cost. Different purchase volumes and sales time periods can affect the amount of discount. Therefore, from the submitted trading records, there is nothing unreasonable in Golden's statement.(3) Golden also asserted that if an independent video rental store negotiated for the purchase of a substantial quantity of movies, Golden would provide a discount based on the quantity and other trading factors. If the quantity and terms were comparable to those of a purchase by Blockbuster, then Golden would offer the same discount it gives that chain. Therefore, Golden could not be deemed to have denied the independent stores the opportunity to negotiate price based on quantity and other trading factors. (4) In sum, the volume of Blockbuster store purchases was comparatively greater that could give it comparatively greater power over price negotiation. As the volume of purchases also influences the trading price per unit, Golden, weighing such factors as trading volume, trading time period, movie grades, and distribution cost, provided Blockbuster with a comparative discount. It could not be deemed that Golden lacked proper grounds for this practice. Therefore from the facts at hand, it could not be deemed that Golden's practice of providing different trading prices according to the different purchasing volume, trading time period, and movie grades of the different trading counterparts violated Article 19(ii) of the Fair Trade Law.3. Golden's requirement that only by joining its business alliance can independent rental stores obtain movies:(1) When they appeared before the FTC, the complainants placed a telephone call to Golden. In response to the complainants' query, the Golden staff person who answered the call stated that a single-unit licensing VCD, DVD, or VHS for the movie The Accidental Spy was NT$2,000. There was no mentioning that only by joining the business alliance could non-member rental stores purchase movies. A supporting record to this conclusion is on file.(2) According to information from Golden regarding shipments made to non-member stores for 2000 through April 2001 requested by the FTC, there were many dozens of trading counterparts, and more than 1,000 shipping notices, which mean that there were more than 1,000 trades. Therefore it was apparent that if non-chain stores elect not to join the business alliance, they could still engage in trading by individually selecting movies on a film-by-film basis. (3) In sum, from the facts at hand, it could not be deemed that Golden improperly required non-chain stores to join its business alliance as a condition for obtaining its movies. Therefore Golden was found not to have violated Article 19(vi) of the Fair Trade Law.Appendix:Golden Communications (Taiwan) Co., Ltd.'s Uniform Invoice Number: 22714311Summarized by Chen, Chun-Ting; Supervised by Cheng, Chia-Ling