Consumer cooperatives carried out inspection of membership ID at time of payment and imposed a 4% overhead cost on people who did not carry a membership card, for which they could obtain a uniform invoice
Chinese Taipei
Case:
Consumer cooperatives carried out inspection of membership ID at time of payment and imposed a 4% overhead cost on people who did not carry a membership card, for which they could obtain a uniform invoice
Key Words:
obviously unfair conduct, consumer cooperatives, inspection of membership ID at the time of payment
Reference:
Fair Trade Commission Decision of 18 October 1995 (the 210th Commission Meeting); Disposition (84) Kung Ch'u Tzu No. 145
Industry:
Consumer cooperatives (5319)
Relevant Laws:
Article 24 of the Fair Trade Law
Summary:
1. The Cooperatives Union was commissioned by Central Personnel Administration and the Ministry of Education [hereinafter referred to as the "MOE"] to handle the purchases and sales of daily necessities provided specifically for government employees and teachers of public schools. This commissioned business was executed pursuant to the provisions of the Implementing Plan for Consumer Cooperatives in Authorities and Schools Providing Government Employees and Teachers with Daily Necessities. According to the aforementioned provisions relating to the operation in purchase of goods for supply, the Cooperatives Union, with the joint review of the Central Personnel Administration, the MOE, and the Ministry of the Interior, shall consolidate price negotiation, goods purchase and supply so that the purchase price can be lowered and thus offering government employees and teachers more affordable goods. The favorable factors contributing to the low purchase cost include policy considerations inherent in the fact that this commission was given by authorities, large purchase quantity, and low risks involved. Moreover, Article 7 of the Cooperative Law and Article 8 of the Business Tax Law both provide that within their registered business scope, cooperatives are entitled to tax exemption.
2. Some newspaper reported that starting April, 1995, the Cooperatives Union implemented the checking of membership ID at the time of payment, and imposed a 4% overhead cost surcharge on the goods they sold to those who did not hold a membership card. Those who were surcharged could obtain a uniform invoice with a receipt they had got for the surcharge. Therefore, the customer base of the Cooperatives Union seemed to extend to non-members as well. However, even with the 4% surcharge imposed on the goods they sell to customers who fail to present a membership card, the Cooperatives Union still enjoys a competitive edge over others in the price competition, which led to accusations made by other retailers alleging that the Cooperatives Union obstructed fair competition. The investigation shows that on 18th, March, 1995, the Cooperatives Union sent to its members a letter concerning the implementation of checking membership ID at the time of payment as follows:
(1) Starting 1, April, 1995, the Cooperatives Union will make a 4% surcharge for overhead cost at checkout to government employees, teachers and members who do not have a membership ID.
(2) Those who are surcharged by 4% should go to an office where uniform invoices are issued to obtain a uniform invoice with a receipt they have received on the very same day. The 4% surcharge was made to pay for business tax, income tax and personnel expenses.
3. The Cooperatives Union enjoys the advantages of economies of scale resulting from its large purchase quantity and tax exemption on sales. Therefore, with its unique status based on low cost and high business volume, the Cooperatives Union has been far ahead of the ordinary retailers in playing field. Under such circumstances, the Cooperatives Union's act of surcharging those who do not have a membership card 4% overhead cost and issuing an invoice for such surcharge still constitutes a hindrance to fair competition, which in essence is the competition of efficiency in price and service. Such an act is condemnable in terms of commercial ethics, and tantamount to unfair competition to the ordinary retailers, which may also adversely affect the order of trade, and constitute a violation of Article 24 of the Fair Trade Law:
In addition to what has been provided for in this Law, an enterprise shall not conduct other deceptive or obviously unfair acts that are sufficient to affect trading order.
In regard to the aforesaid situation which takes place in the ordinary consumer cooperatives, it is also deemed as a violation of the provisions of the Cooperative Law, and Article 24 of the Fair Trade Law.
Summarized by Lin, Yi-chao
Supervised by Pai, Yu-chuang
＊: For information of translation, click here
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