Hi-Life International Co., Ltd. violated the Fair Trade Law for exploiting its advantageous market position to collect improper additional fees from a supplier
Case:
Hi-Life International Co., Ltd. violated the Fair Trade Law for exploiting 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 7, 2001 (the 500th Commissioners' Meeting); Disposition (90) Kung Ch'u Tzu No. 088
Industry:
Convenience Store Chain Industry (4753)
Relevant Law:
Article 24 of the Fair Trade Law
Summary:
1. The complainant was a supplier of Hi-Life International Co., Ltd. (Hi-Life) and engaged in the business of tobacco and alcohol purchasing. It alleged that Hi-Life exploited its advantageous market position to collect improper additional fees from its suppliers.2. In the "Trading Promotion Agreement" between Hi-Life and the complainant, three "Sponsorship Fees" - a "New Store Opening Sponsorship Fee," "Annual Founding Anniversary Sponsorship Fee," and "Thanksgiving Anniversary Sponsorship Fee" were described. Under the agreement, for each new store opening, company anniversary in June, and the opening of each 100th store, the complainant was required to pay a specific fee or use other means to sponsor or share expenses of the occasions. Hi-Life admitted that it had reached its "500th Store Celebration" in April 1998, its "600th Store Celebration" in November 1999, and its "700th Store Celebration" in September 2000. According to information submitted by Hi-Life, between September 1998 and June 1999, its purchases from the complainant totaled NT$1.93 million, in which the additional fees collected accounted for 56% of those purchases. 3. Decision and Reasons for Disposition:(1) Hi-Life had an 11.4% share in the market of convenience store as of the end of 1998. It had 555 stores nationwide at that time and 712 stores as of the end of 2000. Not only was its business scale growing steadily, its ranking in the convenient store market remains a comfortable third. If Hi-Life agreed to carry a supplier's products, those products could at once be displayed for sale on the shelves of the more than 700 Hi-Life stores in Chinese Taipei. As consumers of tobacco products in Chinese Taipei customarily make their purchases from retail vendors, Hi-Life was obviously an important trading counterpart of the complainant due to its control over the terminal distribution market, which is equivalent to the control over the retail market. In addition, from September 1998 to June 1999, sales between the complainant and Hi-Life amounted to NT$1.93 million, in which the additional fees collected accounted for 56 percent of those sales. Hi-Life's advantageous market position must have been one of the important reasons why the complainant was willing to accept those trade terms. It is evident that Hi-Life possessed an advantageous market position vis-a-vis the complainant.(2) In the "Trading Promotion Agreement," the "100th Store Celebration Sponsorship Fee" and a "New Store Opening Sales and Promotion Contribution Fee" was stipulated. Under the agreement, for each new store opening or 100th store opening, a "New Store Opening" fee and a "100th Store" fee would be collected, respectively. There was no direct connection between the collection of the fees and product promotion. Although a 100th store celebration did not take place during the period in which the transaction between the complainant and Hi-Life occurred, other suppliers that relied on the end-user market channel were still required to sponsor new store openings and 100th store celebrations in accordance with the related provisions of the "Trading Promotion Agreement." The collection of those additional fees had violated general commercial ethics and improperly suppressed the trading counterparts of Hi-Life. Namely, Hi-Life had exploited its advantageous market position to force its trading counterparts into accepting unfair trade terms. Such a conduct had impeded fair and efficient market competition and undermined legitimate and reasonable trading order. Article 24 of the Fair Trade Law is applicable in this case.(3) After weighing Hi-Life's motives for its unlawful conduct, its purposes, the degree of harm caused to trading order, its business scale and operational condition, market position, any past violations, and its attitude after violations etc., pursuant to the forepart of Article 41 of the same Law, the Fair Trade Commission ordered Hi-Life to immediately cease the conduct in question and imposed an administrative fine of NT$1 million.Appendix:Hi-Life International Co., Ltd.'s Uniform Invoice Number: 23285582Summarized by Tai, Pei-Yi; Supervised by Chen, Yuhn-Shan