Five cosmetics importers allegedly entered resale price maintenance agreements and imposed restriction on business activities of their distributors
Chinese Taipei
Case:
Five cosmetics importers allegedly entered resale price maintenance agreements and imposed restriction on business activities of their distributors
Key Words:
agreed-upon resale prices, imported goods
Reference:
Fair Tadr Commission Decision of 1 July 1992 ( the 39th Commission Meeting), Dispositions (81) Kung Ch'u Tzu No. 009, 010, 011, 012 and 013
Industry:
Cosmetics Wholesale Industry (5182)
Relevant Laws:
Summary:
1. In 1992, the Fair Trade Commission selected cosmetics and six other products for investigation to ascertain if there was any violation of the Fair Trade Law due to their failure in reflecting the reduction of tariffs and appreciation of NT Dollars. The Commission found that five cosmetics companies – Hwa Tzu Cosmetics Co., Ltd., Yi Chia Co., Ltd., Chi Jen Hang Co., Ltd., Yi Li Co., Ltd. and Taiwan Pao Li Co., Ltd. – had uniform selling prices at their retail outlets. Each of their franchise agreements with their distributors contained provisions, requiring the distributors to sell goods at single retail prices such as "the Promisor shall sell the Franchiser’s products for prices set by the Franchiser," "Party A shall sell products provided by Party B for prices set by Party B," (Article 8 of the Special Outlet Agreement) "sell the products for the retail prices set by Party B," (Article 2 of the Retail Agreement executed between cosmetics companies and department stores), and " Party A shall comply with the retail prices set by Party B and shall not, for any reason, sell such products for prices other than the retail prices set by Party B without B’s consent" (Article 3 of the aforementioned agreement). In addition, cosmetics companies appeared in this this Commission and explained that uniform prices were enforced for the marketing strategy and product image of XX cosmetic products.
2. Judging from the market positions of cosmetics companies, cosmetic market structure and cosmetic product characteristics, the Commission found that cosmetics companies enjoyed certain exclusivity due to strong consumer preference in selecting cosmetics, and higher brand loyalty to cosmetics than to general products. As a result, their distributors dared not violate such restriction for fear of active retaliations or passive boycotts such as discontinuance of goods supply, evacuation of shops, removal of sales representatives, inadequate supply of goods, etc. Thus, such restriction was compulsory and unjustified.
3. The restriction imposed by the cosmetics companies has undermined fair market competition. Their restriction on resale prices and prohibition against any promotional activities of the distributors resulted in uniform retail prices for cosmetics nationwide. As a result, distributors could not engage in retail competition based on their own advantages, nor could consumers enjoy any benefits from competition on the retail level. Under such circumstance where retailers could not engage in any competition, the cosmetics companies at issue never had any need to engage in any price competition with other cosmetics companies. This is substantiated by the fact that the prices of the cosmetics at issue were never adjusted primarily for the sake of competition.
4. Based on the foregoing reasons, this Commission hereby decides that the cosmetics companies at issue shall, within 10 days upon receipt of this Disposition, notify their distributors (who have been subject to restriction on resale prices and promotion activities) in writing that they may now freely decide the resale prices and engage in promotional activities. Upon issuance of such notification, the cosmetics companies shall also submit a copy of such written notification to the Commission for reference.
Summarized by Li, Yen-hsi
Supervised by Li, Yen-hsi
Appendix:
Hwa Tzu Cosmetics Co., Ltd.'s Uniform Invoice No.:36260296
Yi Chia Co., Ltd's Uniform Invoice No.:23472620
Chi Jen Hang Co., Ltd.'s Uniform Invoice No.:3428414
Yi Li Co., Ltd.'s Uniform Invoice No.:22023196
Taiwan Pao Li Co., Ltd.'s Uniform Invoice No.:27991432
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