Kaohsiung Architects Association violated the Fair Trade Law by setting uniform service charge standards

Chinese Taipei


Case:

Kaohsiung Architects Association violated the Fair Trade Law by setting uniform service charge standards

Key Words:

service charge standards, services other than designing and supervision, payment collection and transfer, the Architects Law

Reference:

Fair Trade Commission Decision of January 9, 2003 (the 583rd Commissioners' Meeting); Disposition (92) Kung Ch'u Tzu No. 092009

Industry:

Architectural and Engineering Technical Services (7000)

Relevant Law:

Article 14(1) of the Fair Trade Law

Summary:

1. Article 11 of the Architects Law provided that architects associations shall set standards for service charges. As that provision could not be interpreted in a way that conformed with the legislative intent of the Fair Trade Law (FTL), the Fair Trade Commission (FTC) resolved on 22 December 1999 at the 424th Commissioners' Meeting that the prescription of a fixed or minimum service charge standard was countered to the legislative intent and a violation of Article of 46 of the FTL as amended on 3 February 1999. The FTC sent a letter on 7 January 2000 to the Ministry of the Interior, the competent authority in charge of architectural matters, to request that it consider and incorporate the spirit of fair competition when amending the Architects Law, and to forward the information to its architects associations that they are not allowed to engage in concerted action or acts prohibited under other articles of the FTL. A grace period of one year was given for architects associations to delete the provision for fixed or minimum service charge standards in their regulations governing the business of architects associations. Upon the expiration of that period, the FTC launched an investigation to find whether or not the Kaohsiung Architects Association had actually deleted or revoked the resolutions in question.

2. Apart from resolving upon a service charge schedule for architects at its members meetings, the Kaohsiung Architects Association provided in its articles of association that members might be expelled from the association if they reduced service charges in competition for business or contravened the regulations on business or the association's covenants or resolutions. The provision was likely to bind its members in determining their service fees, within the limit of the service charge schedule. The association also agreed to perform consigned collection of service payments on behalf of its members and further prescribed the "Guidelines by the Kaohsiung Architects Association for Service Payment Collection and Transfer on Behalf of its Members" so as to make sure that its members charged accordingly, which acts were likely to further compel its members to stick to the service charge table. The afore-stated acts were substantiated with the information provided by 53 responding construction companies. Nearly 80% of architects used the service charge table as a basis or as reference to reach an agreement with construction companies upon allocation of service fees, and nearly 40% of the payments for architectural services fell within the scope of the charge schedules. Furthermore, as expressly stipulated in consignment contracts or based on the claims of architects, roughly 55% of architects had to consign collection of service charges with their association before they could obtain stamped approval of their applications for construction permits from the association. The FTC even discovered cases where architects associations required architects or construction companies to supplement the insufficient amount if they charged below the standard specified in the service charge schedule and to consign the association to collect the service fee on their behalf.

3. It was also discovered that, at its 19th directors meeting of the fifth term, the Kaohsiung Architects Association set out titles for architectural services other than designing and supervision and prescribed corresponding service charge standards. The association claimed that the standards were for reference only. However, the fees listed in the service charge table, mostly based upon a fixed or minimum fee standard and actually used by some architects to determine charges, might result in concerted action and were therefore sufficient to create the likelihood of affecting market mechanisms governing supply and demand for the services.

4. Grounds for disposition:
(1) The Kaohsiung Architects Association resolved respectively at its members meeting and directors meeting upon the architect fee standards as well as fee standards for services other than designing and supervision. In its articles of association, it also required its members not to reduce their service charges in competition against other members. Given the likelihood of influencing the supply and demand for architectural services on the market, those acts constituted "concerted action" under Article 7 of the FTL. Up to that point, the association had failed to cancel its resolutions regarding service charge standards for architects and fee standards for services other than designing and supervision. It was obvious that the association intended to use such standards to restrict price competition by its members and to influence the supply and demand on the market, and therefore violated the provision of Article 14(1) of the FTL that no enterprise shall engage in concerted action.
(2) Weighing the motives behind the actions of the Kaohsiung Architects Association, as well as its market power and the damage its actions caused to the trading order, the FTC ordered that, within 14 days from the day following receipt of the written disposition, it must notify its members in writing to cease use of the uniform service charge standards aimed at restricting price competition by its members and to cease engaging in concerted action that would be likely to affect supply and demand on the market. The association was also ordered to cancel or revoke the resolutions in question at the next members meeting and to notify its members of the cancellation in writing, and to provide a secondary notification to the FTC.

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