Collection of membership deposits and boycott against non-members by the Automobile Glass Research and Development Association in Central Taiwan
Chinese Taipei
Case:
Collection of membership deposits and boycott against non-members by the Automobile Glass Research and Development Association in Central Taiwan
Key Words:
concerted action, jointly prescribed fee schedules, boycott against non-members, mutual restrictions
Reference:
Fair Trade Commission Decision of August 23, 1995 (the 202nd Commission Meeting); Disposition (84) Kung Ch'u Tzu No. 127
Industry:
Other Glass and Glass Manufacturing Industries (2629)
Relevant Laws:
Article 14 of the Fair Trade Law
Summary:
1. This Commission received a complaint against the Automobile Glass Research and Development Association in Central Taiwan (hereinafter, the "Association"), which during its fourth provisional session of the third general conference rejected the admission of the complainant and adopted a resolution forbidding all members from supplying the complainant; also, members must give prices pursuant to the fee schedule. Violators of the resolution would be subject to monetary penalties. According to this Commission's investigation, the Association, which was established in early 1991 by companies such as Ta Shih Chieh (President of the Association), Tung Shuai, Nan Hao, etc., to prevent competition and maintain higher profit margins among the members, who were mostly relatives, apprentices or masters to each other. Therefore, the Charter of the Association requires the members' observance of the fee schedule and forfeiture of the deposits in the event of malicious competition among the members. The President serves as the chairman of the Association conferences, which are usually followed by social banquets. The major issues discussed in the conferences include the fee schedule, new members, penalties against members who violated the Association's requirements, exchange of glass installation techniques for new automobile models, annual tours, emergency relief for members, etc. The resolutions adopted during the conferences are subsequently sent to members and suppliers.
2. According to the investigation, the Association issued letters dated September 18, 1992 and February 17, 1993 (reference number: Chung Tzu (Po) No. 003 and Chung Po Tzu No. 007) to its members reporting the resolutions adopted in two meetings. Specifically, the first letter reported a resolution that un-approved discounts were subject to a penalty of NT$ 300,000 (the letter emphasized that such resolution was adopted unanimously); the second letter reported a resolution forbidding the members from supplying members who had violated the requirements of the Association. Through the Association's letter dated September 12, 1994 (reference number: Chung Po Tzu No. 027), the members were notified of the resolution adopted during the fourth special session of the third general conference whereby six companies were admitted to the Association. In that meeting, a resolution was also adopted requiring the members and suppliers not to supply materials to Sheng Fu, which had no intention of joining the Association, sanctioned by a penalty of NT$ 150,000. In addition, the Association announced a new fee schedule and discount criteria, which were effective on October 1 of the same year. The Association also announced that private investigators were to be retained to investigate the selling prices quoted by the members, and in the event of any violation, members with a membership of less than one year were subject to a penalty of NT$ 300,000 and revocation of membership would be imposed on; old members were subject to a penalty of NT$ 150,000. Companies testifying before this Commission also confirmed the fact that any person seeking to operate such business and become a member of the Association was required to have five years of experience and the consent of the responsible person of the company where such person worked, to pay a deposit, and to be subject to penalties for failure to comply with the requirements governing supply of goods. The President of the Association, when testifying before this Commission, also admitted to such requirements that the supplier must not supply non-members. In 1991 when the Association was just founded, there were 25 members. Between late 1991 and early 1993, four new members were admitted, with another four new members by September of 1994. By the time the complaints were lodged against the Association, the Association had a total membership of 33. Except for the first addition of four members, all other members were required to pay a deposit.
3. Article 14 of the Fair Trade Law stipulates expressly that enterprises should not engage in any concerted action. Resolutions adopted during the past conferences of the Association were mostly restrictions on the admission of new members and joint decisions on prices. These resolutions constituted actions restricting business activities or impedes fair competition under the Fair Trade Law. Facts in support of the conclusions include: (1) A community with restricted competition was established through improper admission conditions and restrictions on trading partners (by refusing to supply materials to non-members). (2) A monetary penalty system was in place against members who supplied to non-members. (3) A fee schedule was agreed upon by the members, implemented by price checks and forfeiture of deposits, resulting in distortion of the market price mechanism. (4) Several joint agreements have long been implemented among the members of the Association, which were also provided in the Charter of the Association. The requirement of deposit or refusal to supply non-members is adequate to fulfill the objectives of protecting the members and restricting competition.
After the promulgation of the Fair Trade Law, the Association not only failed to terminate the illegal practices but also continued to formulate further agreements amongst the members. Most members testified that agreements reached in the past were done through resolutions adopted unanimously by the decision-making body (general conference). In addition, attendance in such conferences was as high as 90%. Even if such conferences were not attended by all members, the controller would have the resolutions be sent to each member of the Association. Furthermore, most members have been supportive of all measures taken by the Association and agreed that such an area is less competitive than other areas. The practice of price checks and penalties also attests to the facts of competition restrictions. Based on the above reasons, such acts of the Association have constituted concerted actions under the Fair Trade Law. Therefore, all members of the Association have violated Article 14 of the Fair Trade Law, which forbids concerted action by enterprises.
Summarized by Huang, Ch'ung-chieh
Supervised by Yu, Su-su
Appendix:
Ta Shih Chieh Automobile Glass Co., Ltd.'s Uniform Invoice No.: 52873693
＠: For information of translation, click here
[Browse by APEC Member
Economies] [Browse by Subject Categories] [Home]
[Decisions] [Approvals] [Interpretations] [Administrative Guidance]