Alleged violation of the Fair Trade Law by Miller Brewing Company [respondent] for exploiting another person's work result
Chinese Taipei
Case:
Alleged violation of the Fair Trade Law by Miller Brewing Company [respondent] for exploiting another person's work result
Key words:
commerce in goods, business ethics, condemnable
Reference:
Fair Trade Commission Decisions of 29 April 1998 (the 338th Commission Meeting) and 3 June 1998 (the 343rd Commission Meeting); Letter (87) Kung Er Tzu No. 8606189-028
Industry:
Alcoholic Beverage Manufacturing Industry (1183)
Relevant Laws:
Summary:
Meal Company Ltd. [complainant] entered into a distribution agreement with the respondent in 1990 for the exclusive distribution of Miller beer in Chinese Taipei. On 18 December 1996, the respondent notified the complainant that the respondent wanted to terminate the agreement and requested each of the complainant's distributors to contract with another company (T'ai Tien International Trading Co., Ltd.). The complainant considered the respondent’s act an abuse of its unilateral termination right under the agreement to extract the result of the complainant's hard work and take over the complainant's distribution channels. The respondent was alleged to have violated the provisions of Articles 19(vi) and 24 of the Fair Trade Law. The Fair Trade Commission found the issue was a contractual dispute involving contract termination and should be handled through civil procedure. The FTC therefore stopped its investigation in accordance with the Fair Trade Law. This Commission replied to the complainant by letter on 28 January 1997. The complainant found the reply dissatisfactory and appealed to the FTC on 3 March 1997. The Appeal Review Committee receded the original disposition by Decision of 31 May 1997 ref. (86) Kung Su Tzu No. 059.
The FTC's 343rd Commission Meeting of 3 June 1998 accordingly reprocessed the case and reached a decision finding that the agreement at issue was made in 1990, before the enactment of the Fair Trade Law. In spite of the various unfair provisions contained in the agreement as alleged by the complainant, judging by the market when the agreement was terminated in 1996, the FTC found that the complainant did not have any substantial market power. In addition, according to the response provided by Miller beer distributors and related parties, the FTC found no evidence indicating that the respondent had violated the Fair Trade Law. Detailed reasons for the decision are as follows:
(1) There were various brands of beer products in Chinese Taipei, including the local brand, Taiwan Beer, and many other foreign brands. With high substitutability for the beer product, customers’ preference was not obvious, and there was no distinctive market division. The beer products were mostly domestically produced, which took a market share of about 70%, with imported beer products sharing the other 30%. According to the FTC's statistics regarding the beer market share for the years 1995 and 1996, the Miller beer imported and distributed by the complainant held a rather low market share, which meant the complainant was not in an influential market position. The FTC found that, as there was no likelihood of fair competition being hindered, Article 19(vi) of the Fair Trade Law did not apply.
(2) The cooperation between the complainant and respondent lasted for about six years. In order to determine whether the downstream distributors' are dependent on upstream supply, in addition to [considering] the length of the two parties' cooperation, the supplier's dependence on the distributors' equipment, distribution and maintenance must also be considered. In this case, there was no strong distinction for sale of different brands of beer. In other words, those who sell Miller today could sell others tomorrow.
(3) Both parties had a part in developing market access and promoting Miller beer. From 1988 to 1995, the respondent shared a certain percentage of the marketing costs. The FTC found that both parties had cooperated in sharing the marketing costs and planning. That is, both parties contributed to the promotional success. The distributors of Miller beer who indicated in 1996 that they were accounts developed by the complainant or accepted the complainant’s recommendation to distribute Miller beer had [combined] sales volume reaching NT$520 million, accounting for 41.93% of the total sales of NT$1.24 billion.
The complainant indicated that the respondent, by granting its general distributorship to T'ai Tien, took over its market access and employees from whom the respondent might obtain the complainant's production and sales information. The FTC found the circumstances described by the complainant were due to the termination of the agreement, where the downstream distributors needed to purchase supplies from T'ai Tien. T'ai Tien's supplying Miller beer to the distributors and the personal decisions of the complainant's employees [whether to divulge the complainant's information] had no relation with the respondent. Therefore, there was no concrete evidence to show the respondent had violated the Fair Trade Law.
Summarized by Hwu, Jishyan
Supervised by Shih, Chin-ts'un
Appendix:
Meal Company Ltd. Uniform Invoice No.: 22656760
Miller Brewing Company Uniform Invoice No.: 97177030