Wellcome Taiwan Company Ltd. violated the Fair Trade Law for using its advantageous market position to collect improper additional fees from a supplier
Case:
Wellcome Taiwan Company Ltd. violated the Fair Trade Law for using its advantageous market position to collect improper additional fees from a supplier
Key Words:
advantageous market position, additional fees
Reference:
Fair Trade Commission Decision of June 14, 2001 (the 501st Commissioners' Meeting); Disposition (90) Kung Ch'u Tzu No. 089
Industry:
Supermarket Industry (4752)
Relevant Law:
Article 24 of the Fair Trade Law
Summary:
1. The complainant, a supplier of Wellcome Taiwan Company Ltd. (Wellcome), alleged that Wellcome used its advantageous market position to collect improper additional fees from its suppliers.2. According to the contents of the "1999 Business Consultative Agreement" and "2000 Business Consultative Agreement" between Wellcome and the complainant: Whenever Wellcome opened a new store, its supplier was required not only to pay a "New Store Opening Sponsorship Fee" of NT$1,700 per store, but also to provide a "New Store Opening Discount" of five percent on the first merchandise orders. In addition, whenever Wellcome remodeled an existing store, the complainant was required not only to pay a "Store Remodeling and Reopening Sponsorship Fee" of NT$900 per store, but also to provide a "Remodeled Store Opening Discount" of five percent on the first merchandise orders.3. Decision and Reasons for Disposition:(1) Wellcome's business income in 1999 exceeded NT$8.46 billion, accounting for approximately 11% of the market for supermarket. Wellcome owned 105 "Welcome Supermarkets" and was the largest operator of supermarket chain stores in Chinese Taipei. Many of Wellcome's suppliers were producers or distributors of fresh foods, food products, and daily necessities. As supermarkets offer both a complete range of products and convenient locations, consumers' habits in shopping for fresh foods, food products, and daily necessities have shifted in Chinese Taipei. Where they once had to make separate purchases from fresh food stalls at traditional markets to satisfy all of their shopping needs, they now can do so with a single purchase at supermarkets. Therefore, once a supermarket system with high annual revenues and wide spread chain stores agreed to carry a supplier's products, it guaranteed the supplier an installed base of customers and a minimum sales volume. Wellcome collected various additional fees from the complainant, and the proportion of those fees to overall sales was a substantial burden to the complainant. Wellcome must have had a relatively advantageous market position for the complainant to be willing to trade with Wellcome in spite of these circumstances.(2) According to the content of the standardized agreements "1999 Business Consultative Agreement" and "2000 Business Consultative Agreement" between Wellcome and the complainant, in addition to collecting a "New Store Opening Sponsorship Fee" of NT$2,000 to NT$5,000, and a "Remodeled Store Reopening Sponsorship Fee" of NT$800 to NT$2,000 from the complainant, Wellcome also collected a "New Store Opening Discount" and a "Remodeled Store Opening Discount" of four or five percent on the first merchandise orders. Wellcome did in fact collect various compulsory additional fees in the form of "Sponsorship Fees" and "Discounts" for "New Store Openings" and "Remodeled Store Reopenings" from the complainant. This is supported by "Itemized Payments Receipts" of Wellcome and the complainant. However, Wellcome's collection of the said fees under the standardized agreements did not promote sales of products. Wellcome merely took advantage of the complainant's pressure to maintain its existing business relations with Wellcome to force the complainant to bear the additional fees. This conduct harmed the essence of market competition and was reprehensible in terms of commercial competition ethics. Therefore, Article 24 of the Fair Trade Law was applicable in this case.(3) After weighing Wellcome's motives for its unlawful conduct, its objectives, the degree of harm caused to trading order, its business scale and operational condition, market position, the record of any past violations, and the attitude toward its unlawful conduct, etc., pursuant to the forepart of Article 41 of the Fair Trade Law, the Fair Trade Commission ordered Wellcome to immediately cease the conduct in question and imposed an administrative fine of NT$2 million.Appendix:Wellcome Taiwan Company Ltd.'s Uniform Invoice Number: 22662257Summarized by Tai, Pei-Yi;Supervised by Chen, Yuhn-Shan