Hsin Pin Tao Cable Distribution System Co., Ltd., Feng Meng Television Engineering Co., Ltd., and K'e Ning Mass Media Co., Ltd. violated the Fair Trade Law for their regional program distributorship agreement
Chinese Taipei
Case:
Hsin Pin Tao Cable Distribution System Co., Ltd., Feng Meng Television Engineering Co., Ltd., and K'e Ning Mass Media Co., Ltd. violated the Fair Trade Law for their regional program distributorship agreement
Key words:
improper restrictions on trading counterparts' business activities, cable TV
Reference:
Fair Trade Commission Decision of the 326th commission meeting, (87) Kung Ch'u Tzu No. 054
Industry:
Broadcasting Television (8050)
Relevant Laws:
Article 19(iii) of the Fair Trade Law (hereinafter the “Law”)
Summary:
Some of the cable TV system operators in the northern region of Changhua County and in Feng Yuan, Taichung County filed a complaint to this Commission alleging that Hsin Pin Tao Cable Distribution System Co., Ltd. (Hsin Pin Tao) and Feng Meng Television Engineering Co., Ltd. (Feng Meng) had signed distributorship agreements with certain channel/program providers with regard to TVBS channels whereby other cable TV system operators were forced to deal with them or would be unable to obtain a license to broadcast such channels/programs. The complaint pointed out that the respondents also asked the complainants to join their integration project. It was alleged that the respondents violated the Fair Trade Law by the above acts.
The investigation showed that K'e Ning Mass Media Co., Ltd. (K'e Ning) had confronted difficulties in its effort to promote its channels in the northern region of Changhua County and the district of Feng Yuan. Feng Meng and Hsin Pin Tao were respectively the first and the second cable TV companies in the two said areas. Hsin Pin Tao admitted that, to prevent other system operators in the same areas from obtaining regional program distributorship for competition, it paid K'e Ning NT$3.2 million per month to obtain a regional distributorship for TVBS channels. Feng Meng admitted it had obtained regional distributorship for TVBS channels from K'e Ning and Fei Suo channels from Pa Ta Broadcasting Co., Ltd. Feng Meng said its purpose was to obtain profit from distribution, and it paid K'e Ning a royalty of NT$2.8 million per month inclusive of copyright and distributorship. Feng Meng said it had negotiated with the complainants regarding channel distributorship, but no deal was concluded due to disagreement on price.
In accordance with Article 19(vi) of the Law, an enterprise shall not impose improper restrictions on its trading counterparts’ business activities as a condition of doing business with them, which act is likely to impede fair competition. The first half of Article 41 of the Fair Trade Law provides that this Commission may order a violator of the Law to cease or rectify its act within a specified period of time. Article 24 of the Enforcement Rules of the Fair Trade Law explains that "restrictions" refer to tie-in, exclusive trading, territory, customer or utilization restrictions, and other restrictions on trading counterparts' business activities. Whether or not the restriction is improper shall be determined based on the intention of the party who imposes it, its objective, its market position, the structure of the market, features of the product and the influence of the restriction on competition. The cable TV system operators divided their market with each region shared exclusively by a limited number of operators. While the competition is fierce and cable TV programs are protected by the Copyright, the key to the system operators' survival is to secure the programs for the provision of services. However, if a system operator obtains channels/programs through regional distributorship, it not only secures its source of channels/programs but also controls the source of other system operators. Under the circumstance, the other system operators will have to accept the price set jointly by the distributor and the channel/program provider, which price includes the distribution costs and profits charged by the distributor. It is also impossible for the other system operator to negotiate prices with the channel/program providers independently. On the other hand, if the negotiation between the distributor and the other system operators fails, the distributor will only have to bear the loss of royalty, while the latter will face the risk of losing subscribers. Accordingly, the system operator who is granted the distributorship in effect obtains an advantageous position and the ability to restrict competition. Thus, the competition relies not on the system operator's effort to upgrade its efficiency but on the channel/program distributor's not providing channels/programs to the competitors. Such development is against reasonable competition that is supposed to be centered on economic efficacy. Therefore, the program distributor‘s act of obtaining regional distribution is in itself likely to restrict fair competition.
The investigation also found that both Hsin Pin Tao and Feng Meng are the major system operators in the areas, and they are relatively powerful among their competitors. By taking advantage of obtaining regional distributorship for ERA's channels/programs [i.e. TVBS channels/programs] through K'e Ning, both respondents made it a fact that their competitors will have to compete with them at the same price without the opportunity of negotiating a favorable price with their system operators. It has not only adversely affected the order of trade, but has also caused an impediment to fair competition of the region.
In view of the respondents' intention, objective and market position, the structure of the market, features of the product, and the effect upon the market competition, the respondents' acts are found to be in violation of Article 19(vi) of the Law, which prohibits an enterprise from imposing improper restrictions on its trading counterparts’ business activities as a condition of doing business with them, which act is likely to impede fair competitions. This disposition is hereby rendered in accordance with Article 41 of the Fair Trade Law.
Summarized by Liao, Hsien-chou
Supervised by Hsin, Chih-chung
Hsin Pin Tao Cable Distribution System Co., Ltd.’s
Uniform Invoice No.: 84847972
Feng Meng Television Engineering Co., Ltd.’s Uniform Invoice No.: 86827762