Carrefour Taiwan JV violated the Fair Trade Law for exploiting its advantageous market position to collect improper additional fees from a supplier
Case:
Carrefour Taiwan JV 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 December 6, 2001 (the 526th Commissioners' Meeting); Disposition (90) Kung Ch'u Tzu No. 199
Industry:
Retail Volume Sale Industry (4754)
Relevant Law:
Article 24 of the Fair Trade Law
Summary:
1. The Tang Chia Co. (the complainant), a supplier of Carrefour Taiwan JV (Carrefour) engaged in the tobacco and alcohol purchasing and sales business, alleged that Carrefour exploited its advantageous market position to collect improper additional fees from its suppliers.2. Carrefour's 1999 and 2000 standardized supplier agreements provided for the collection of a total of 11 additional fees. These included a "National Sales Promotion Fee," calculated as a fixed percentage of total purchases, as well as a "Minimum Amount Due." In addition, the function of the "Hsin Tien Opening Giveaway" and "Remodeling Reopening Giveaway" was the same as that of the "Opening Special Clause" and "Storefront Remodeling Special Clause," which was to sponsor store openings and sales promotions. According to the supplier agreement between Carrefour and the complainant and related evidence, Carrefour was the complainant's only trading counterpart. Carrefour did not discuss the various annual sales promotion activities with the complainant before entering into the agreement with the complainant. Yet Carrefour collected multiple additional fees with identical functions, such as the "New Store Opening Giveaway," "Opening Special Clause," and "Storefront Remodeling Special Clause," from the complainant.3. Reasons for disposition as followings:(1) Carrefour had a 27.35% market share in the hypermarket business, which indicated evidently a significant market position. The complainant had annual revenues of only NT$10 million, and the products it sold consisted of small household furniture sold at mid- to low-level prices. These products are displayed and sold through such end-user channels as convenience stores and supermarkets and are not on a par with furniture that is displayed in department stores. Therefore the complainant is not in a position to control the channels through which its product are sold. In 1999, the total amount of additional fees collected by Carrefour from the complainant equaled 39.25% of its total sales revenues. Hence Carrefour's advantageous market position must have been an important reason why the complainant was still willing to accept those trade terms in 2000. It is obvious that Carrefour possessed an advantageous market position vis-a-vis the complainant.(2) Carrefour asserted that if the complainant was unable to reach its forecast sales figures in the current year, Carrefour would reduce or maintain the minimum payable amount of the "National Sales Promotion Fee" for the following year. The complainant's sales in 1999 were NT$13 million, only 52% of its targeted annual sales. However when Carrefour negotiated agreements in 1999, it did not maintain or reduce accordingly the minimum amount due; it was raised by 16% instead. In addition, the 2000 targeted annual minimum sales set by Carrefour for the complainant was 2.23 times the actual business volume of Tang Chia Co. in 1999. Therefore the amount of the additional fees obviously exceeded the interest that could be directly obtained by Tang Chia Co. Carrefour relied on its advantageous market position with respect to Tang Chia Co. to collect additional fees in amounts that were obviously unreasonable. In addition, the function of the two items "Hsin Tien Opening Giveaway" and "Remodeling Reopening Giveaway" was the same as that of the "Opening Special Clause" and "Storefront Remodeling Special Clause," which was to sponsor store openings and sales promotions. The fact that the complainant chose to pay a surrogate fee instead of give a gift or flowers, which would have been much cheaper, is certainly contrary to general reasonable trading practices. It is therefore evident that Carrefour relied on its advantageous market position to collect multiple compulsory additional and redundant fees. In sum, Carrefour was found to have violated Article 24 of the Fair Trade Law.(3) After weighing Carrefour's motives for its unlawful conduct, its purposes, the degree of harm caused to trading order, its business scale and operational condition, its market position, the record of past violations, and its attitude after violations, etc., pursuant to the forepart of Article 41 of the Fair Trade Law, the Fair Trade Commission ordered Carrefour to immediately cease the conduct in question and imposed an administrative fine of NT$5 million.Appendix:Carrefour Taiwan JV's Uniform Invoice Number: 22662550Summarized by Tai, Pei-Yi; Supervised by Chen, Yuhn-Shan