The cable broadcast system operators, Hsin Yi Huan Le, Fu Shih, Lung Ch'ih, Chn P'in Tao, and Ch'ang Te violated the Fair Trade Law for engaging in concerted action

Chinese Taipei


Case:

The cable broadcast system operators, Hsin Yi Huan Le, Fu Shih, Lung Ch'ih, Chn P'in Tao, and Ch'ang Te violated the Fair Trade Law for engaging in concerted action

Key Word:

concerted action, uniform action, cable television, price increase

Reference:

Fair Trade Commission Decision of June 16, 1999 (the 397th Commission Meeting); Dispositions (88) Kung Ch'u Tzu Nos. 070, 071

Industry:

Television Industry (8520)

Relevant Law:

Article 14 of the Fair Trade Law

Summary:

  1. Since February 1999, the Fair Trade Commission (the Commission) had repeatedly received complaints that some cable TV system operators had greatly increased their rates to NT$600 per month starting January 1999; other cable TV system operators within the same area likewise seemed to raise their charges simultaneously. The Commission thus dispatched personnel to conduct investigations in the following cable TV operating areas: Taipei's Nei-hu and Chung-shan districts, Keelung, Hsinchu, Taichung, and Kaohsiung's Feng-shan district. The scope of the investigations covered changes in subscription charges, factors taken into consideration, decision-making process, and changes in the cost structures of the relevant operators in 1988 and 1999.

  2. Although the subscription fees charged by the relevant cable TV operators were consistent with the “Standard Subscription Charges for Cable TV Programming in 1999” as prescribed by the Government Information Office (GIO) under the Cabinet, the subscription rate standards formulated by the GIO merely set the maximum allowable subscription charges (from NT$541 to NT$600). The use of contracts, agreements, or other forms of consent by competing cable TV operators to jointly decide cable TV program subscription charges should still be governed by the FTL prohibiting concerted actions, even though the subscription rates set by the operators may be below the limits set by the GIO. Determination of whether the subscription charges of NT$600 was reasonable falls under the jurisdiction of other government agencies and was therefore not investigated by the Commission.

  3. Investigations showed that a number of cable TV operators in Taipei, namely Hsin Yi Huan Le, Fu Shih, Lung Ch'ih, Chin P'in Tao, and Ch'ang Te, had noticeably different subscription rates in 1988; the operators individually each conducted different promotional campaigns to compete for customers. In January 1999, even though the domestic economic situation was not conducive for even a marginal increase in subscription charges, the above operators raised their subscription charges significantly, resulting in a uniform subscription charges after the its increase. During the same period, group subscribers in residential buildings also were given less room for price negotiation, and their subscription prices were raised shortly thereafter. In addition, the previous price competition and promotion campaigns that were prevalent in 1998 also disappeared. After January 1999, there were likewise few changes either in the subscribers or in the market share of the cable operators concerned. The above facts indicated that the degree of competition had lowered since January 1999.

    Investigations also showed that sales representatives of some cable operators had, in non-formal contacts at the end of 1998, suggested among themselves that starting 1999, they should no longer compete using low prices. The information was relaid on the decision-makers of the different cable operators, and was used as a basis for their subscription rate increase in January 1999.

    The cable operators had originally used varying methods of fee collection: monthly, semi-annually, or annually. However, investigations by the Commission showed that regardless of the previous methods of payments, the cable operators began in January 1999 to collect fees at a uniform rate of NT$600 for monthly fees, NT$3,300 for semi-annual fees, and NT$6,500 for annual fees, and NT$450 to NT$500 for each individual subscriber within the same residential building. The conformity of the rates with the standard subscription rates announced by the GIO in no way exempts the concerted decision of such fees from the applicability of the Fair Trade Law (FTL).

  4. In view of the uniformity observed in the above investigations, the Commission compiled cases from competent authorities of market competition in the United States, the European Union, Japan, and Germany, and reviewed their methods of handling such cases. At the 397th Commission Meeting on June 16, 1999, the Commission determined that the cable TV operators Hsin Yi Huan Le, Fu Shih, Lung Ch'ih, Chin P'in Tao, and Ch'ang Te, through exchange of market information at the end of 1998 and through communication of their intention to refrain from price competition, simultaneously adjusted their cable TV subscription rates as of January 1999. After applying the experiences of the international competent authorities in the handling of “uniform actions” and reviewing the evidence collected during its investigation, the Commission determined that the aforementioned action was a concerted action as defined by Article 7 of the FTL, wherein “competing enterprises, by means of contract, agreement, or other form of consent, acted jointly to decide the price of goods and services.” Such action violated Article 14 of the FTL.

    The Commission thus order the cable TV operators to cease such actions pursuant to Article 41 of the FTL. In addition, the Commission imposes fines of NT$5 million, NT$2.5 million, NT$2.5 million, NT$5 million, and NT$2.5 million on the cable TV operators Hsin Yi Huan Le, Fu Shih, Lung Ch'ih, Chin P'in Tao, and Ch'ang Te, respectively. The amount of the fines is determined after taking into account the changes in subscription charges, number of subscribers, business conditions, and the duration of the violations of the different operators.

 

Summarized by Liu, Hsi-jung

Supervised by Ch'en, Hui-p'ing

 

Appendix:

Hsin Yi Huan Le Broadcast System Corp.'s Uniform Invoice Number: 84745222

Fu Shih Broadcast System Corp.'s Uniform Invoice Number: 84950932

Lung Ch'ih Broadcast System Corp.'s Uniform Invoice Number: 84296344

Chin P'in Tao Broadcast System Corp.'s Uniform Invoice Number: 84706017

Ch'ang Te Broadcast System Corp.'s Uniform Invoice Number: 86303192

 


**: For information of translation, click here