Taiwan Stock Exchange Corporation abused its market monopoly, in violation of Fair Trade Law, by improperly collecting user fees for providing trading information on listed securities

Taiwan Stock Exchange Corporation abused its market monopoly, in violation of Fair Trade Law, by improperly collecting user fees for providing trading information on listed securities

Chinese Taipei

Case:

Taiwan Stock Exchange Corporation abused its market monopoly, in violation of Fair Trade Law, by improperly collecting user fees for providing trading information on listed securities

Key Words:

trading information on listed securities, information technology company, information transmission method, information user fees, fixed charge, variable charge, monopoly

Reference:

Fair Trade Commission Decision of August 22, 2002 (the 563rd Commissioners' Meeting); Disposition Kung Ch'u Tzu No. 091133

Industry:

Other Securities (6319)

Relevant Law:

Article 10(1)(ii) of the Fair Trade Law

Summary:

1. An information technology company (IT company) which had applied to provide trading information on listed securities alleged the Taiwan Stock Exchange Corporation (the TSE) of violating three corrective guidelines set out in the 6 April 1984 Decision of the 130th Commissioners' Meeting. These guidelines require that securities information be transparent and be provided at a reasonable fee, and that the collection of fees not inappropriately extend downstream. The TSE collected information user fees at varying rates, which impacted competition between IT companies.

2. The TSE is Taiwan's only institution authorized by the competent authority under the Securities and Exchange Law to establish centralized auction premises for the trading of marketable securities Furthermore, by taking the information generated in the matching of consigned trading orders for listed securities and making it available to parties (including IT firms) that apply to use it, the TSE has formed an upstream-downstream economic relationship, for which reason it should be subject to the provisions of the Fair Trade Law. As the only seller in the “market for information on listed securities trading,” the TSE unquestionably enjoys monopoly status.

3. In order to satisfy user demands for multiple access channels to trading information on listed securities, IT firms have actively competed to research and develop innovative terminal display products (e.g. PDAs) as well as provide new transmission methods (e.g., the Internet, FM subcarriers, mobile phones, mobile data etc.) and improve existing terminal information reception services. These advances helped attract new customers or secure existing ones.

Efforts towards the diversification of transmission methods providing trading information have been beneficial to the circulation and dissemination of domestic securities trading information. The TSE, however, did not reveal costs or revenue data related to the use of such information, nor did it consult with IT firms regarding the revision of information usage fee standards. A fact undisputed by the TSE is that it transmits identical trading information to all IT firms by the same methods of transmission and at the same cost. In light of this fact, the TSE's cost structure remains the same no matter what transmission method IT firms use to transmit the trading information to customers, which may incur different costs for facilities, manpower, and development for the IT firms, or different costs that end users spend on equipment and access fees billed by the IT firms. Yet the TSE required IT firms to pay (i) fixed monthly rates calculated on a tiered scale according to the number of individual reception units (which in fact is the result of IT firms' design and innovation) or a fixed charge of NT$60,000, and (ii) additional “variable charges” in the neighborhood of NT$100,000 for each transmission method. The TSE was obviously creating grounds for charging exorbitant fees, taking advantage of the liberalization of telecommunication as well as the fruits of the downstream IT firms' efforts. This would inevitably suppress the willingness of IT firms to pursue efficient competition. It thus obstructs fair competition and hinders the availability and dissemination of trading information.

4. Reasons for the disposition:

(1) The TSE is a monopolistic enterprise providing listed securities trading information. It concealed cost information when negotiating with IT firms and inappropriately increased the cost burden of those firms without first reaching a consensus with them. Although its own costs did not increase in tandem with the range of transmission methods developed through the innovations and efforts of the IT firms, the TSE levied monthly “fixed charges” on the IT firms per the various kinds of transmission methods, and also inappropriately collected an NT$100,000 “variable charge” per transmission category. This should be considered an extortion of the efforts and accomplishments of downstream IT firms to exact exorbitant profit and hinder the effective competition strived for by IT Firms. The TSE thus abused its monopolistic market position by improperly setting, maintaining, or changing the compensation for goods or services in violation of Article 10(1)(ii) of the Fair Trade Law.

(2) After considering the TSE's motives and purposes, its business scale, its market position, the degree of the damage to trading order and other factors, the Fair Trade Commission did not impose an administrative fine, but in order to prevent the TSE from further abusing its monopolistic position and pursuing exorbitant profits by imposing spurious standards for its information fees that inappropriately hinder the competition of downstream IT firms, it ordered the TSE to cease the acts in question within three months, and adopt the necessary corrective measures listed below.

(i) Before setting, maintenance, or changing information user fee standards, the TSE must fully disclose itemized department-by-department cost/revenue information to the competent authorities in charge of securities and to IT companies for reference. The information must be prepared in accordance with accounting principles and certified by a certified public accountant.

(ii) Before setting, maintenance, or changing information user fee standards, the TSE shall consult fully with IT companies.

(iii) The TSE shall cancel the current calculation scheme of fixed and variable charges for information usage fees and adopt a fixed rate collection scheme

Appendix:

Taiwan Stock Exchange Corporation's Uniform Invoice number: 03559508

Summarized by Sun, Ya-Chuan; Supervised by Horng, Der-Chang