Hung-Chong Co. was accused of appending unreasonable terms when entering the contracts with its trading counterparts, in possible violation of the Fair Trade Law

Case:

Hung-Chong Co. was accused of appending unreasonable terms when entering the contracts with its trading counterparts, in possible violation of the Fair Trade Law

Keywords:

Hung-Chong, Fujifilm, developing and printing industry, Article 19 of the Fair Trade Law, Article 24 of the Fair Trade Law

Reference:

Fair Trade Commission Decision of November 25, 2004 (the 681st Commissioners' Meeting); Kung Yi Tzu No. 0930009257, Kung Yi Tzu No. 0930009258, Kung Ch'u Tzu No. 093118

Industry:

Household Electrical Appliances and Electronic products Repair Shops (9591), Photofinishing Shops (9691)

Relevant Laws:

Articles 19 and 24 of the Fair Trade Law

Summary:

1.	The case originated from a complaint letter filed by several photograph taking business operators stating that: Chinese Taipei has nearly 180 Fujifilm FDI developing and printing franchises. A complete set of FRONTIER 350 costs 6 million New Taiwan Dollars. However Hung-Chong forced its franchisers to accept unreasonable contract terms. Hung-Chong even kept centrally the sales contracts of developing and printing machines purchased by the franchisers, franchise contracts, and the maintenance contracts of developing and printing machines, while the business operators had none.
2.	Upon the investigation, the Fair Trade Commission (FTC) found that: According the record, the "Sales Contracts," "Contracts with Fujifilm Color Image Developing and Printing Shops/Fujifilm Digital Image Printing Shops," and "Maintenance Contracts of Frontier for Fuji Developing and Printing Shops" were indeed centrally kept by Hung-Chong and were not delivered to the purchasers. This part was admitted by Hung-Chong, who stated that, "…Therefore, it is necessary to keep the contracts confidential. In order to avoid any transaction trouble in the future, our company tends to bring back the contracts for preservation. Most franchisers also express their willingness to let our company bring back the contracts for preservation. The business representatives of our company always explain orally that the contracts must be brought back to our company…"
3.	Grounds for the disposition:  (1) In a contractual relationship, the contract is the most critical evidencing document of rights and obligations. Especially in the relationship of a standard contract, the party who stipulated the standard contract apparently has a better understanding of the rights and obligations than the other party to the contract, and already has a certain advantageous position with regard to the relevant information of the contract. If such a party refuses to deliver the contract to the other party after the contract is constituted, when this other party wishes to claim his/her contractual rights in the future, there will be difficulties due to the lack of the contract as evidence. Such an act of refusing to hand over contracts is exploiting the advantageous position against the trading counterpart. It is conspicuously unfair. (2)  Although Hung-Chong expressed that "if any franchiser requests for the contract, we can hand over the photocopy of the contract to him at any time, or can make a photocopy while contracting." However, Hung-Chong did not initiatively express to the trading counterparts that they may make photocopies of the contracts in question and keep the photocopies. Additionally, if the trading counterparts might still be able to keep the photocopies of the contracts, how can the purpose of confidentiality be maintained as claimed by Hung-Chong? Obviously, Hung-Chong did not agree in principle that the trading counterparts might make photocopies and keep the contracts. Moreover, the complainants alleged that the calculation method of the maintenance-contracting fee was unreasonable. Although Hung-Chong disclosed relevant trading information in the sales contracts, since the complainants did not have the possession of such sales contracts, it became a dispute between both parties that whether the trading information regarding the term where the maintenance contracts must be signed with Hung-Chong from the second year after the purchase of machines was fully disclosed. (3)  Hung-Chong's conduct of keeping the contracts for its trading counterparts already caused the fact that the complainants were unable to clearly control each term agreed on in the beginning of the transactions. It even caused difficulties for the complainants, when both parties have disputes thereafter, to give evidence or to claim their rights and interests. Such a conduct caused inequality of trading information to both parties of the contract. Hung-Chong exploited its relatively advantageous position to engage in unfair trading conducts. It was indeed an obviously unfair conduct sufficient to affect trading order in violation of Article 24 of the Fair Trade Law.

Summarized by Mai, Huei-Li;

Supervised by Lu, Li-Na

Appendix:

Hung-Chong Co.'s Uniform Invoice Number: 04401323