An investigation initiated by the Fair Trade Commission into whether Microsoft Taiwan Corporation and related enterprises abused the power of their exclusive market position to monopolize the software market in violation of the Fair Trade Act

Chinese Taipei


Case:

An investigation initiated by the Fair Trade Commission into whether Microsoft Taiwan Corporation and related enterprises abused the power of their exclusive market position to monopolize the software market in violation of the Fair Trade Act

Key Words:

monopoly, tying, administrative settlement

Reference:

Fair Trade Commission Decision of February 27, 2003 (the 590th Commissioners’ Meeting); Letter Kung Er Tzu No. 0920001779

Industry:

Information Supply Services (7503)

Relevant Law:

Articles 10, 19(vi) and 24 of the Fair Trade Act

Summary:

1. During April and May of 2002 the Fair Trade Commission (FTC) established the “Software Market Monopoly Task Force” to initiate an investigation into whether Microsoft Taiwan Corporation (Microsoft Taiwan) had taken advantage of its exclusive position in the software market to set unreasonable prices and engage in improper tying of products in its Office software packages. Following almost six months of investigation, Microsoft Taiwan issued a letter to the FTC on 3 October 2002 requesting an administrative settlement. The FTC noted, in a unanimous resolution passed at the 573rd Commissioners’ Meeting of 31 October 2002, that it was still unable to confirm the relevant facts and legal relationships in this case, and that in order to effectively reach their administrative goal and to resolve the dispute, the FTC agreed in principle to Microsoft Taiwan’s request and would begin the negotiation process. In order to handle matters relevant to this administrative settlement, the FTC strengthened and restructured the Software Market Monopoly Task Force. Furthermore, Microsoft Taiwan submitted separate administrative settlement proposals to the FTC respectively on 9 December 2002 and 6 January. After these submissions, a unanimous resolution at the 583rd Commissioners’ meeting of 9 January 2003 stated that the proposals submitted by Microsoft Taiwan did not yet reflect a position to which the FTC could commit, and that a written statement of the FTC's position would be forthcoming. Thereafter, both parties engaged in intensive negotiations, and Microsoft Taiwan on 26 February 2003 submitted a settlement offer. By unanimous resolution at the 590th Commissioners’ meeting of 27 February 2003, the FTC found the offer to be in the public interest (ensuring a fair trade order, protecting the interests of consumers and promoting development of the information industry) and accordingly gave its approval. The FTC concluded its investigation through service of the aforementioned administrative settlement agreement to Microsoft Taiwan on 27 February 2003.

2. The contents of Microsoft Taiwan’s administrative settlement offer included the following distinguishing features: (1) the setting of software prices for consumers and educational users; (2) promotion of consumer interests; (3) promotion of intra-brand competition; (4) provision of after-sales service for software products; (5) allowance for reasonable access to source codes; (6) implementation in the Taiwan market of Microsoft's US settlement agreement; (7) provision of mechanisms for consultation; and (8) setting the effective starting date and the term of the settlement agreement. The content of the agreement includes terms that guarantee a fair trading order, protect the interests of consumers and promote development of the information industry, and it is expected that they will have a dynamic and positive effect in promoting a sound competitive environment, protecting the interests of consumers and promoting development of the information industry, as well as aiding overall economic development.

3. From its beginning to its conclusion, the FTC handled this case in accordance with the law, following the strictest procedures and maintaining the highest degree of administrative efficiency. It established a special interdepartmental task force on a scale never seen before, investing considerable manpower and material resources, and convening 28 meetings of the task force. It engaged in comprehensive research into related issues, not only collecting a variety of ideas and opinions from within the country but also taking into consideration the latest trends and developments with respect to Microsoft's international status in order to provide a firm foundation for negotiations on the issues. As regards the negotiation process, the FTC conducted 12 exchanges of opinion and formal negotiations with Taiwan Microsoft and its related enterprises, beginning from 2 December 2002. The final stages of negotiations continued day and night for over 27 hours. Even during this period the FTC adhered to the strictest legal procedures, attempting to deliver a response to the public's earnest expectations in the shortest period of time possible.
The FTC is the competent authority over competition law, exercising its ex officio powers in accordance with the law. In handling this case, official letters were issued to gather opinions from industry, government and academic circles, and a special area was set up on the FTC’s website to collect a wide range of consumer and public opinion, and inform itself of broad consumer sentiment regarding Microsoft's pricing policies. Opinions from all areas were incorporated objectively into the administrative settlement procedures and brought into consideration regarding the settlement offer submitted by Microsoft Taiwan. Furthermore the matters encompassed in the settlement were ultimately more extensive than those originally investigated by the FTC and those with which the FTC is charged. In the creation of this administrative settlement agreement, the greatest effort was put forth and the greatest benefit to the public obtained. The solution was a winning proposal for the government, the consumers and for Microsoft.

Appendix:
Microsoft Taiwan Corporation’s Uniform Invoice Number: 23525730

Summarized by Hsu, Tuan-Ting; Supervised by Shih, Chin-Tsun