Violation of the Fair Trade Law by the Tie-in Sale of Advertisements of the Three Wireless Television Companies (Taiwan Television Enterprise, China Television Company, and Chinese Television System)
Chinese Taipei
Case:
Violation of the Fair Trade Law by the Tie-in Sale of Advertisements of the Three Wireless Television Companies (Taiwan Television Enterprise, China Television Company, and Chinese Television System)
Key Words:
tie-in sale, likelihood of restricting fair competition
Reference:
Fair Trade Commission Decision of 4 August 1993 (the 96th Commission Meeting); Disposition (82) Kung Yi Tzu No. 53095 and Disposition (82) Kung Ch'u Tzu No. 056
Industry:
Television Broadcasting Industry (8520)
Relevant Laws:
Article 19(vi) of the Fair Trade Law
Summary:
1. A legislator questioned during the legislative interpolation session in 1993 that the television companies' advertising operations involved tie-in sale of commercials that were in violation of the Fair Trade Law, and requested that this Commission investigate this matter. Concurrently, this Commission also received complaints about the above-mentioned practice by consumers. To investigate this case, this Commission invited the relevant advertising agencies to the fact-finding meetings. These agencies unanimously pointed out that the three wireless television companies - Taiwan Television Enterprise, China Television Company and Chinese Television System - used their advantageous positions in the television advertising market and tied-in the advertising time slots for low-rating programs to those for high-rating programs.
2. According to this Commission's investigation, TV commercials are the main service items of the above-mentioned three wireless television companies. Advertising time slots for different programs are separable sales objects and are subject to different billing standards; the fee schedules are made available to the public. Furthermore, according to the statements of the advertising agencies, the three television companies demanded that advertisers buy advertising time slots for low-rating television programs when they buy time slots for high-rating programs. The three television companies denies the accusation and contended that they merely give, free of charge, advertising time slots for low-rating programs to advertisers buying time slots for high-rating programs. However, the general understanding of gift is that one party expresses his intention of giving his own asset to another party without consideration and the receiving party agrees to accept such asset. According to the statements made by advertising agencies and television companies before this Commission, however, the advertisers did not obtain the tied-in advertising time slots unconditionally from the three television companies. Instead, such free time slots were conditioned on the purchase of advertising time slots for high-rating programs. Since TV commercials are the main services item of the television companies, such conditional gifts of time slots for low-rating programs were tie-in sales although they were entitled gift. In addition, the three television companies had express or implied restrictions that advertisers could not choose to purchase time slots for high-rating programs only. Therefore, the defense of gift suggested by the three television companies is not acceptable.
3. Article 19(vi) of the Fair Trade Law prescribes that an enterprise shall not impose conditions on business transactions that improperly restrict their trading counterparts' business activities, which is likely to restrict fair competition. Furthermore, Article 24 of the Enforcement Rules of the Fair Trade Law provides that "the 'restrictions' as used in Article 19(vi) of the Law refer to tie-in, exclusive dealing, geographical limitation, customer restriction, use restriction, and other restrictions restraining trading counterparts' business operations." Accordingly, a tie-in sale engaged by an enterprise that may restrict fair competition constitutes a violation of Article 19(vi) of the Fair Trade Law. An Interpretation of this Commission, Kung Yen Shih No. 045, sets the factors to be considered when determining a tie-in exists:
(1) Requirements:
(a) at least two separable products (services) are in existence, and
(b) there are express or implied agreements that deprives the buyer of its free choice regarding the purchase of the main product and tied-in product.(2) Illegality:
(a) the seller has certain market advantages when demanding the tie-in,
(b) there is a risk of restricting market competition for tied-in products, and
(c) the seller does so without justifiable cause.
4. The tie-in sale was not done by the three television companies as a necessary measure to maintain their business reputation or service quality. Therefore, the tie-in was obviously undertaken without justifiable cause. Furthermore, there were only three wireless television companies at that moment. The tie-in operations of the three companies had a dominating influence on the television market. They not only deprived the trading counterparts (advertisers) of the freedom to choose the advertising time slots, but also distorted the competition between companies producing television programs. Therefore, in accordance with Article 24(2) of the Enforcement Rules of the Fair Trade Law, such tie-in constituted improper restrictions on the trading counterparts and was likely to restrict fair competition; it was in violation of Article 19(vi) of the Fair Trade Law.
Summarized by Lai, Mei-hua
Supervised by Lin, Yu-ch'ing
Appendix:
Taiwan Television Enterprise's Uniform Invoice Number.: 20685000 China
Television Company's Uniform Invoice Number: 18556774
Chinese Television System's Uniform Invoice Number: 20516997
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