Chunghwa Telecom Co., Ltd.'s Premium Rate Service Program Fee Contract alleged to violate the Fair Trade Law
Case:
Chunghwa Telecom Co., Ltd.'s Premium Rate Service Program Fee Contract alleged to violate the Fair Trade Law
Key Words:
fixed network, business operating rules, intelligent network
Reference:
Fair Trade Commission Decision of December 27, 2001 (the 529th Commissioners' Meeting); Letters (90) Kung Yi Tzu No. 9004157-006 and 9004157-007
Industry:
Telecommunications (6000)
Relevant Law:
Article 24 of the Fair Trade Law
Summary:
1. On 10 September 1998 the complainant signed a Premium Rate Service Program Fee Contract with Chunghwa Telecom Co., Ltd. (the respondent) and engaged the respondent to collect fees from its telephone subscribers for premium rate services provided by the complainant through the respondent's "intelligent network." During the execution of the contract, however, the respondent failed to provide ample opportunity to thoroughly inspect the terms and conditions of the standardized service contract. In addition, the respondent decided unilaterally to slash collection of fees for the complainant's programs by NT$22.42 million during the period from December 1999 through February 2001. Further, the reduced fee collections were not compensated through deductions from the complainant's line charges or account handling fees. During the subsequent final accounting, the respondent declared that its actions in cutting programming fee collections were prompted by programming that constituted "uncollectable programming fees" under Article 4, subparagraph 3 and Article 5, subparagraph 2 of the Fee Contract. Nevertheless, it still deducted 6% and 10% of the original programming fees for line charges and account handling fees, respectively, without any adjustment for the uncollected portion. The complainant alleged that the respondent's actions were in violation of Articles 10 and 24 of the Fair Trade Law. 2. The investigation results found by the Fair Trade Commission were as followings: (1) The respondent's "Business Operating Rules for Intelligent Network Premium Rate Services" took effect after the respondent had applied for and received the approval from the competent authority under Article 27 of the Telecommunications Law. The content of the respondent's "Premium Rate Services Program Fee Contract" are derived from the content of the above-mentioned business operating rules. Given that the approval of the business operating rules was based upon a clearly defined legal authority and that the competent authority is required under the relevant provisions of the Telecommunications Law to perform substantive review of their content and is authorized under Article 28 of the Telecommunications Law to order telecommunications enterprises to modify such operating rules where circumstances that are obviously unfair or unfavorable to consumers right, and given the faith of enterprises in the content of said operating rules as approved by the competent authority, enterprises deserve, in principle, to be shielded from administrative liability. In this case, the complainant provided premium rate services to telephone subscribers via the respondent's intelligent network and engaged the respondent as its agent for the collection of fees for said services. The "programming fees" for such services are collected by the network operator (the respondent) on behalf of content providers (in this case, the complainant), and are split between the two parties. The "line charges" are paid by content providers for use of the respondent's telephone network each time as a customer dials up program content. The "account handling fees" are paid to the network operator (the respondent) by content providers for various administrative and handling fees associated with collection of each programming fee amount, such as pricing and fee calculation, preparation of telecommunications bills, postage, collection and account write-offs, overdue fee collection, customer inquiries, and the printing of bills and other materials. The difference lies in that these costs including "line charges" and "account handling fees" are fixed and exist whether or not the "programming fees" are collected from end users. Where the respondent is unable to collect programming fees, the costs are even higher due to the expenditure of additional manpower and material resources derived from efforts to collect accounts that are overdue or in default. Further, the respondent has drawn up "Guidelines for Handling Premium Rate Service Billing Disputes" and "Guidelines for the Operation of Local Telephone Businesses" and distributed them to each of its local operations offices throughout Taiwan to provide a reference in deciding whether to approve reductions in premium rate service fees to users, standards for reductions, and a basis for execution of fee collection from end users. Supporting evidence can be found in reports of collection processes and actual past cases of litigation submitted by the respondent. Considering Chunghwa Telecom's role of collection agent for premium rate services, the respondent's calculation and collection of "line charges" and "account handling fees" did not exceed the scope of reasonable necessity. The principles for reductions of disputed programming fees and the collection operations of overdue fees had a legal basis. Available evidence thus clearly indicates that the respondent did not abuse its market position to improperly collect fees from the complainant or indiscriminately approve programming fee reductions and delay collection of fees owed by end users; and thus did not act in violation of Articles 10(1)(ii) or 10(i)(iv) of the Fair Trade Law with regard to abuse of market position by monopolistic enterprises.(2) Of the constituent elements of Article 24 of the Fair Trade Law, foremost is the sufficiency to affect the trading order and secondary are actual or potentially deceptive or obviously unfair acts. With regard to the execution of contracts between enterprises, the trading terms of such contracts are entered into on the basis of free will and contractual practices should in principle be viewed in the context of contractual freedom. When such contractual practices threaten the competitive or market trading order, however, such practices are outside the scope of contractual freedom and subject to the provisions of Article 24 of the Fair Trade law. As for specific trade disputes of an uncommon nature, in the event such disputes do not conform to the conditions of being "sufficient to affect the trading order," they shall be resolved through civil litigations; only when such disputes conform to the said conditions are they subject to the application of Article 24 of the Fair Trade Law. Whether the practices in this case constitute the condition of "deceptive" practices hinges upon whether or not the respondent "engaged in trading practices seeking to actively or passively conceal important trading information from the trading counterpart." The contract and business operations rules in dispute had already been publicly posted in the respondent's place of business and on the respondent's website in accordance with relevant provisions of the Telecommunications Law. Also, on 22 June 2000, the respondent notified 31 information services providers when changing the contract for the first time and provided copies of its Premium Rate Service Program Fee Contract for examination and photocopying by trading counterparts, an act which can be regarded as providing ample opportunity for the trading counterparts to examine the contracts. The content of the respondent's Premium Rate Service Program Fee Contract, as previously mentioned, was derived from the content of the business operating rules approved by the competent authority for telecommunications. In principle, the network operator's reliance interest in the competent authority's approval of the contract content should shield the operator from administrative liability. So, no deceptive or obviously unfair means were employed to induce the trading counterpart to accept the terms of the contract, or impair the capacity of the trading counterpart to make a free, proper, and reasonable decision. Moreover, the business operating rules of a telecommunications enterprise constitutes an agreement regarding the terms and conditions of service between the telecommunications enterprise and users, and can be construed as a standardized contract between the enterprise and the end user. Article 24 of the Fair Trade Law applies to cases of contractual terms obviously unfair to the extent of affecting the rights of the consumer only if the constituent element of "sufficiency to affect the trading order" is met, and then only if a major public interest is involved. With regard to determining sufficiency to affect the trading order in interpreting applicability, Article 24 may potentially be applied in cases where there is sufficiency to affect the trading order or where the effect of eliminating questionable practices may be achieved. Specifically, consideration should at least be given to the number of persons harmed, the degree of losses caused, whether there would be a deterrent effect on other enterprises, and whether specific groups or organizations were targeted by the obviously unfair practices. In principle, specific, isolated disputes over standardized contracts should fall under the purview of the Civil Code or the Consumer Protection Law rather than the Fair Trade Law. In viewing the current state of the fixed network market, although the respondent still clearly holds the dominant market position, consideration of this case reveals it to be purely an individual contractual problem between the respondent and the complainant and does not involve a material public interest. Consequently, it is not likely to be sufficient to affect the trading order.3. In this case, the Fair Trade Commission made a decision that there was no specific evidence that the respondent abused its market position or committed other deceptive or obviously unfair acts sufficient to affect the trading order. Therefore the Fair Trade Commission cannot hold the respondent in violation of Article 10 or Article 24 of the Fair Trade Law.Appendix:Chunghwa Telecom Co., Ltd.'s Uniform Invoice Number: 96979933Summarized by Lu, Li-Na; Supervised by Lee, Wen-Hsiu