The administrative office of Kaohsiung Chiang Kai-shek Cultural Center [hereinafter referred to as "KCKSCC"] demanded without proper or justifiable cause that the winning bidder provide a supply certificate for the equipment the KCKSCC procured

Chinese Taipei

Case:

The administrative office of Kaohsiung Chiang Kai-shek Cultural Center [hereinafter referred to as "KCKSCC"] demanded without proper or justifiable cause that the winning bidder provide a supply certificate for the equipment the KCKSCC procured

Key Words:

Kaohsiung City; import; supply certificate; discriminatory treatment; designated brands

Reference:

Fair Trade Commission Decision of 8 November 1995 (the 213rd Commission Meeting); Disposition (84) Kung Chu Tzu No. 167

Industry:

Government agencies (9111); AV electronics industry (3159)

Relevant Laws:

Article 19(ii) of the Fair Trade Law

Summary:

1. When the administrative office of the KCKSCC held the second bidding for the second time for the special equipment and interior renovation of the KCKSCC, the office demanded that the winning bidder put forward a "supply certificate issued by the original manufacturer" for the computerized light controller, the light tuner machine, and the audio mixer of a designated brand as a condition for the signing of the contract. The winning bidder was unable to obtain such a certificate and its winning qualification was thus canceled with its bid bond of NT$ 18 million being forfeited; the bidder therefore complained to the Commission the aforementioned situation.

2. The investigation showed that the sanctioned party required the winning bidder to provide a supply certificate issued and signed directly by the original manufacturer of products of the designated brand. This was apparently advantageous to the original manufacture located abroad and Fu Mao Co. ("Fu Mao"). This excluded the winning bidder from obtaining a certificate of authorization from a branch factory or branch company of the original manufacturer. In addition to the original manufacturer being a beneficiary of this discriminatory treatment, it was beneficial to Fu Mao which had a long-term relationship with the original manufacturer abroad. Despite Fu Mao's statement that it had never signed any agency agreement in writing with Soundcraft Co. in the United Kingdom, a letter sent by Soundcraft Co. to Creative Trading Company stated that the audio mixer required might be purchased from a Chinese Taipei's agency, Fu Mao. Moreover, Soundcraft Co. claimed that it did not agree to exclusively license Fu Mao for the sales of its professional Console, but because Fu Mao happened to be the supplier of Soundcraft's products that was most capable of the installation of these products, Soundcraft Co. would like to describe Fu Mao as an "exclusive" agent. Therefore, the aforesaid situation in which the winning bidder was required to present a supply certificate has indirectly led to the discriminatory treatment , which placed Fu Mao in a more advantageous position than its competitors.

3. (1) Article 2(4) of the Fair Trade Law states that other individuals or organizations engaging in trade by supplying goods or services is an enterprise referred to in this Law. The sanctioned party, the administrative office of the KCKSCC, is the agency which held the bidding for the procurement of special equipment and interior renovation. The KCKSCC is leased out to other people and the sanctioned party charges the users site maintenance fees and cleaning fees pursuant to the regulations on the use of KCKSCC site. So it must be noted that such an act has market value, thus making the sanctioned party fall under the definition of enterprises specified in the Fair Trade Law.

(2) The cause for giving discriminatory treatment to another enterprise was hardly justifiable.

(i) The sanctioned party claimed that the aforesaid requirement was to ensure to get the equipment and after-sale service from the original manufacturer so that the whole project could be completed successfully and pass the final inspection, and that the system would work well in the future. However, in view of the facts that the administrative office canceled this specific requirement at the third bidding, and that said project was successfully completed, it is hard to see that the requirement for the particular certificate was relevant to the aforesaid purposes. Furthermore, although it is hard to find discriminatory actions in the designation of a particular brand for a small amount of the equipment, such action of designating a brand does have the effect on limiting competition opportunities between brands. This action, combined with the restriction that the brand must also have a supply certificate issued by the original manufacturer, thereby prohibiting the winning bidder from obtaining the goods from a branch company, branch factory, agent, or a trading company , has the affect of impeding intra-brand competition. Therefore, the reason stated by the sanctioned party for such a requirement can hardly be accepted as a due cause referred to in Article 23 of the Enforcement Rules of the Fair Trade Law.

(ii) Statistics show that between July 1991 and June 1996, the market value of the special equipment installed and related projects in the concert halls of all cultural centers totaled NT$ 1,112,760,000, among which the special equipment and interior renovation project in the KCKSCC in this case was worth NT$ 158,330,000, accounting for 14.23% of this market. Therefore, it can be concluded that the sanctioned party is able to affect the competition in the market and its discriminatory treatment to another enterprise is likely to hinder fair competition, thus constituting a violation of Article 19(ii) of the Fair Trade Law.

　

Summarized by Lee, Yen-hsi

＊＊: For information of translation, click here

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