Use of non-transparent terms relating to de-stocking of goods at Circle K Convenience Store Taiwan Limited convenience stores, an obviously unfair trading practice sufficient to affect the trading order in violation of Article 24 of the Fair Trade Law

Chinese Taipei

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Summary:

1. A supplier of Circle K Convenience Store Taiwan Limited (Circle K) filed a complaint alleging that the chain store operator unilaterally removed their products from its stores' shelves, declaring their poor sales performance yet without providing any evidence of actual sales figures. Circle K, relying on the need to protect business secrets, ignored requests that it provide reasons for the de-stocking of their goods and sales records. Circle K also allegedly failed to return the space allowance paid by suppliers at the time they removed goods from store shelves, in violation of the provisions of the Fair Trade Law.

2. The terms and conditions for de-stocking by Circle K were provided in its “New Product Advertising Fee Agreement.” Article 6 of the said agreement provides only the following: “When Circle K Convenience Stores remove products from their shelves for poor sales performance, the supplier shall conduct merchandise return procedures at all Circle K convenience stores within 14 days after receipt of the de-stocking notification. When no action was taken before the deadline elapsed, Circle K shall itself handle the goods to be returned and deduct the value of said goods from the supplier's account and the supplier may not file objection to said actions.” Circle K did not, however, clearly define “poor sales performance” or the time frame involved.

3. After several months selling newly stocked items, Circle K would place the responsibility for “poor sales performance” completely on the supplier without providing evidentiary materials relevant to the terms and standards that define “poor sales performance.” This might cause the suppliers difficulties in finding similar or substituting distribution channels at such short notices when their goods were unexpectedly removed from Circle K's shelves and might bring about unforeseeable and unfavorable consequences to the suppliers. In any event, all suppliers paid Circle K a specific sum of allowance to obtain space on Circle K shelves for their goods. Relying on its advantageous position to unilaterally draft its standardized “New Product Advertising Fee Agreement,” in which the meaning of “poor sales performance” is not precisely prescribed, and to remove suppliers' goods from its shelves without refunding the pre-paid space allowance by claiming that the supply contract had expired, Circle K obviously took advantage of its suppliers' widespread desire to maintain their business relationships to pressure them into accepting the unfair terms of the abovementioned agreement. Circle K's actions had impeded market competition and were against commercial ethic in violation of Article 24 of the Fair Trade Law for its disruption of trading order.

4. Circle K's use of its comparatively advantageous position to unilaterally prescribed “New Product Advertising Fee Agreement” and to pressure suppliers into accepting its unfair terms of supply was an obviously unfair act sufficient to disrupt the trading order, in violation of the provisions of Article 24 of the Fair Trade Law. In accordance with the provisions of Article 41 of the same law, Circle K was ordered to immediately cease the offending practices and an administrative fine of NT$600,000 was levied against it.

Appendix:

Circle K Convenient Store Taiwan Limited's Uniform Invoice Number: 22853565

Summarized by Chen, Ru-Chen; Supervised by Chen, Yuhn-Shan