Chen Gen CATV accused of seeking to attract viewers through improper price-cutting behavior
Chinese Taipei
Case:
Chen Gen CATV accused of seeking to attract viewers through improper price-cutting behavior
Key Words:
profit inducement, impairment of fair competition, cable television
Reference:
Fair Trade Commission Decision of December 16, 1998 (the 371st Commission Meeting); Letter (87) Kung Yi Tzu No. 8711958-003
Industry:
Television (8520)
Relevant Law:
Article 19(iii) of the Fair Trade Law
Summary:
A competitor from the cable television industry filed a complaint with the Fair Trade Commission (this Commission) asserting that Chen Gen CATV in October 1998 began a promotion to attract subscribers whereby a half-year subscription to the cable service was offered for NT$1,000, on average NT$166.66 per month. The promotion also offered potential subscribers who already had a cable service agreement with another cable company free services for the period of time remaining in their existing contract upon presentation of the receipt for such contract. The complaint alleged that Chen Gen CATV improperly cut prices to induce customers to breach the contracts with their existing suppliers of cable services and sign up with Chen Gen CATV.
The investigation showed that Chen Gen CATV's promotion program set subscription fees at a level comparable to those promotional fees of other cable companies in the Taichung operation area. Chen Gen CATV also claimed that the level of the promotional subscription fees were sufficient to cover its costs of operation, management and distribution, and could thereby reduce the unit price for the acquisition of program licensing. In addition to subscription fees, it was also able to generate income from the installation fees, advertising fees, and sales of other products. Chen Gen CATV's costs and income could balance out and it therefore can never be said that the promotion constituted below-cost pricing. Further, not all of the targeted subscribers of the promotional program were those of the competitor's cable systems in the same area. A number of them were existing subscribers of Chen Gen CATV with whom Chen Gen hoped to renew the service agreement; the others are people who previously had no cable service at all. This is not a case of attracting competitors' customers with profit inducement as referred to in Article 19(iii) of the Fair Trade Law.
With regards to Chen Gen's attracting customers by offering to provide free services for the period remaining in their existing contracts with other cable operators, the investigation showed that it did not have a negative impact on the services actually received by the customers who had paid the service charges. Also, this type of strategy is common in this industry. Therefore, it does not constitute profit inducement either.
Summarized by Ch'en Yi-ch'eng
Supervised by Hsin Chih-chung
Appendix:
Chen Gen CATV Uniform Invoice No.: 16085969