The ROC Over-the-Counter Securities Exchange abused its market monopoly, in violation of Fair Trade Law, by improperly collecting user fees for providing OTC securities trading information
Chinese Taipei
Case:
The ROC Over-the-Counter Securities Exchange abused its market monopoly, in violation of Fair Trade Law, by improperly collecting user fees for providing OTC securities trading information
Key Words:
OCT securities trading information, information technology company, 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. 091132
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 OTC securities alleged that the ROC Over-the-Counter Securities Exchange (the OTC Exchange), with no legal basis, was abusing its market position by charging IT companies information user fees based on the IT companies' methods of transmitting information to users, thus impacting competition between IT companies.
2. The OTC Exchange was established and undertakes trading of over-the-counter securities pursuant to Article 62 of the Securities and Exchange Law, which authorized the Securities and Futures Commission (the SFC) as the competent authority to draft the Regulations Governing Securities Trading on Over-the-Counter Markets. The OTC Exchange has also obtained both a legal and a de facto monopoly position under Article 7 of those Regulations, which state, “the OTC Exchange shall draft operating rules based on the items below governing the trading of securities on over-the-counter markets, submit them to the SFC for approval . . .” Furthermore, by taking the information generated in the matching of consigned trading orders for OTC securities, making it available to parties (including IT firms) that apply to use it, and obtaining consideration therefor, the OTC Exchange has formed an upstream-downstream trading relationship, for which reason it should be subject to the provisions of the Fair Trade Law.
3. In order to satisfy user demands for multiple access channels to OTC securities trading information, IT firms have actively competed to research and develop innovative terminal display products (such as PDAs) as well as provide new transmission methods (e.g. digital transmission lines, the Internet, mobile phones, mobile data, and FM sub-carriers) 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 OTC Exchange, however, did not reveal cost 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 OTC Exchange 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 OTC Exchange'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 OTC Exchange required IT firms to pay fixed monthly rates of NT$60,000, as well as extra “variable fees” of NT$20,000 for each additional method of transmission (up to a limit of three) developed through the efforts of the IT firm itself. The OTC Exchange 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 OTC Exchange relied upon its monopolistic power to conceal cost information when negotiating with IT firms and to inappropriately increase 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 OTC Exchange levied monthly "fixed charges" on the IT firms tied to the various kinds of transmission methods. This should be considered an extortion of the efforts and accomplishments of downstream IT firms to gain exorbitant profit and hinder the effective competition strived for by IT Firms. The OTC Exchange 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 OTC Exchange 's motives and purposes, its business scale, its market position, the degree of the damage to the trading order and other factors, the Commission did not impose an administrative fine, but in order to prevent the OTC Exchange 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 OTC Exchange to cease the acts in question within three months, and adopt the necessary corrective measures listed below:
(i) Before setting, maintaining, or changing information user fee standards, the OTC Exchange 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, maintaining, or changing information user fee standards, the OTC Exchange shall consult fully with IT companies.
(iii) The OTC Exchange shall cancel the current calculation scheme of fixed and variable charges for information usage fees and adopt a fixed rate collection scheme.
Summarized by Sun, Ya-Chuan; Supervised by Horng, Der-Chang