Watsons-Park'N Shop Ltd. was complained for requiring suppliers to sign an “electronic supply chain usage contract” and bear the expenses for the usage of the system, in violation of the Fair Trade Law
Chinese Taipei
Watsons-Park'N Shop Ltd. was complained for requiring suppliers to sign an “electronic supply chain usage contract” and bear the expenses for the usage of the system, in violation of the Fair Trade Law
Key Words:
dominant market position, electronic supply chain
Reference:
Fair Trade Commission Decision of January 2, 2003 (the 582nd Commissioners' meeting); Letter Kung-Yi No. 0920000052
Industry:
Supermarkets (4752)
Relevant Law:
Summary:
1. Watsons-Park'N Shop Ltd. (Watsons) was accused of requiring its suppliers to sign an “electronic supply chain usage contract” and to bear the additional expenses associated with the computerization. The complaint also stated that Watsons unilaterally determined the applicable rules and costs for usage of the system without explaining the ways they were determined, thus constituting an abuse of its dominant market position.
2. Watsons, seeking to improve its existing order transmission system, enhance inventory control and increase the purchasing rights of end consumers as well as abide by the government's 2001 “Promotional Plan for Commercial Automation and Computerization,” sought to compel upstream, mid-stream and downstream enterprises to integrate into a single “commercial electronic system” and thereby improve commercial transaction efficiency and strengthen competitiveness, had therefore developed its more efficient “electronic supply chain” system, which it put into operation in September 2002, and began collecting relevant usage fees from its suppliers. In accordance with the “Watsons Electronic Supply Chain Usage Contract,” Watsons subsequently demanded that its suppliers bear the costs associated with the use of its electronic supply chain system, including the “first-time system setup fee,” “monthly sales information inquiry fee” and “monthly system usage service fee.”
3. After its investigation, the Fair Trade Commission (FTC) made decisions
as followings:
(1) Watsons was a participant in the Ministry of Economic Affairs' “2001 Guidance
Plan for Commercial Computerization Systems.” According to the “Watsons-Park'N
Shop Limited e-Commerce System Plan Introduction and 2001 Guidance Plan Accomplishments”
report provided by the said ministry, total setup costs for the Watsons electronic
supply chain transaction platform amounted to NT$14.22 million, among which
government approved guidance disbursements amounted to NT$1.8 million. Watsons'
technical partner for the system setup was Trade-Van Information Services Co.
The newly installed system offered the following functions: (1) new product
information updates; (2) merchandise ordering and return system; (3) billing
examination system; (4) sales and inventory information rebates; (5) system
security and access restriction management.
Specific benefits the said system brought to suppliers included: (1) the number
of days required for the handling of orders, delivery acceptance, returns and
bill verification was slashed from two to four days to one day; (2) increased
ability for weekly inventory provision and spot provision of sales details;
and (3) increased ability to respond to purchase orders within 24 hours. These
effects are sufficient to demonstrate that the establishment and utilization
of Watsons' electronic supply chain system produced the direct benefits of promotion
of product sales or reducing operating costs for suppliers. Thus there is indeed
a “direct correlation” between Watsons' collection of relevant system usage
fees from suppliers and sales promotions or operating cost reductions.
(2) Among the costs associated with the electronic supply chain system that
Watsons demanded from its suppliers, the “first-time system setup fee” was a
one-time charge for the system setup and registration, all of which was paid
to Trade-Van Information Services Co.
The “monthly sales information inquiry fee” was contingent upon whether a supplier
elected to utilize Watsons' market information analysis, fees for which were
collected separately. To date, only 59.83% of suppliers participating in Watsons'
electronic supply chain system have chosen to do so. As for the amounts charged
for the said service, they varied with suppliers' demands for the information
and the volume of data handled for suppliers electing to utilize this information,
negotiated in light of said suppliers' sales volume and their demands for information.
With respect to the “monthly system usage service fee,” the results of the FTC's
written inquiry among [Watsons'] suppliers indicate that there is indeed a strict
correlation between average monthly sales and the amount for said fees collected.
Thus, users' payments for each of the three abovementioned fees are in compliance
with the principle of proportionality.
(3) In summary, Watsons promotion of its electronic supply chain system offered suppliers the benefits of promoting sales or reducing operating costs and the amount of the system usage fees collected under the terms of the “electronic supply chain usage contracts” executed between Watsons and its suppliers did not exceed the benefits directly reaped by suppliers through the usage of the system. It is thus difficult to maintain that Watsons' actions constituted any violation of the provisions of the Fair Trade Law.
Appendix:
Watsons-Park'N Shop Ltd.'s Uniform Invoice Number: 23224657
Summarized by Tai, Pei-Yi; supervised by Chen, Yuhn-Shan