Nan Yi Bookstore violated the Fair Trade Law by engaging in discriminatory treatment and imposition of improper restrictions [on the activities of its trading counterparts] while selling elementary school reference books
Chinese Taipei
Case:
Nan Yi Bookstore violated the Fair Trade Law by engaging in discriminatory treatment and imposition of improper restrictions [on the activities of its trading counterparts] while selling elementary school reference books
Key words:
publishing industry, discriminatory treatment
Reference:
Fair Trade Commission Decision of the 328th Commission Meeting; Disposition (87) Kung Ch'u Tzu No 087
Industry:
Publishing Service Industry (1940)
Relevant Laws:
Summary:
Currently, as each elementary school teacher is responsible for various courses of the entire curriculum, reference books, in addition to the textbooks have been relied on to supplement the teaching material. Nan Yi Bookstore (Nan Yi) in response to the huge market demand entered into a contract with a few bookstores, based on their distinct localities, and made them Nan Yi's distributors, which are referred to by other retail bookstores as "school-tailored distributors." About one and half months prior to the end of each semester, these distributors begin giving sample books to the elementary school teachers, and teachers in the same grade then jointly decide which reference books will be used for the following semester. The tutor of each class conducts a survey to see how many students would like to buy the recommended reference books, and the school as a whole places an order with the distributors, which delivers the books directly to the school. Such acts appear to be in breach of the Enforcement Guidelines Governing the Normalization of Elementary Education, which the Ministry of Education has promulgated. On the other hand, if other retail bookstores needed to sell such reference books, they could not place orders with the regional distributors, i.e., school-tailored distributors, or start selling these books until winter and summer vacations. In other words, prior to the vacations the retail bookstores simply would not have in stock reference books intended for use in the following semester. The regional distributors were prohibited from reselling such reference books to the retail bookstores before the specified time. Moreover, Nan Yi also required its distributors not to expand their operations across different regions, and placed restrictions on the resale prices. In order to ensure the cooperation from its distributors, Nan Yi even employed a range of sanctions, e.g., collecting deposits, adding secret marks on an insert contained in the portion on one particular subject, and backdating the contracts to dates prior to the enforcement of the Fair Trade Law. In addition, in order to destroy evidence, Nan Yi even demanded the collection of all contracts, kept them under its very eyes, and then destroyed all of them, which not only seriously infringed on the rights and interests of its trading counterparts, but also adversely affected trading order.
In the instant case, Nan Yi was found to be in violation of the Fair Trade Law in four respects:
(1) Requiring its distributors and retail bookstores to maintain specified resale prices: The investigation showed that Nan Yi had punished its resellers in both Tainan and Kaohsiung Counties for their breach of resale price maintenance which is in violation of Article 18 of the Fair Trade Law.
(2) Giving discriminatory treatment between its distributors and the retail bookstores in its supply of books: The school-tailored distributors established by Nan Yi served to sell books directly to the schools, wholesale to the retail bookstores and supplementary schools, and retail to consumers. They, along with the retail bookstores, are at the same level and fulfill the same function as purchases in the production-distribution system. Nan Yi refused to supply the reference books to the retail bookstores before the school-tailored distributors ran out of stock. As a result, the clientele of the retail bookstores was limited to students who were recently transferred from other schools, or had lost their books, or whose school did not place orders on a collective basis. So, it is obvious that Nan Yi intended to exclude the retail bookstores from competition, thus constituting unfair trade in the form of discriminatory treatment, as described in Article 19(ii) of the Fair Trade Law, toward such retail bookstores.
(3) Imposing restrictions on the regions where regional distributors may establish their operations. In the elementary school reference books market, Nan Yi is already pretty well-known. On the other hand, due to the stiff competition among students and schools for high school entrance examinations, the use of reference books has become commonplace. Under these circumstances, if all the distributors are confined within specified locations, they will not be able to expand their operations to other localities. Moreover, even within the particular location, they are not allowed to resell the books to other bookstores, or restock from members of the same business. Therefore, all these restrictions have led to de facto hindrance to fair competition among the distributors, and further affected the competition among the retail bookstores, because the regional distributors also prohibited the retail bookstores from placing orders or restocking across the regional lines. Therefore, Nan Yi violated Article 19(vi) of the Fair Trade Law for imposing sanctions against those of its distributors that had breached the regional restraints.
(iv) Backdating the contracts, keeping all of the distribution contracts, and destroying them afterward: As the contracts between the two parties are sales with buyback arrangements, these distribution contracts serve as important evidence that not only verifies the mutual obligations and rights of the two parties, but also bind them in honoring their commitments. However, what Nan Yi has done makes it very difficult, if not impossible, for the distributors to exercise their claims. As a result, they must sustain unpredictable losses, which is not only patently unfair but also involves deceit, seriously affecting the distributors' rights and interests as well as trading order, as referred to in Article 24 of the Fair Trade Law.
Summarized by Hou, Wen-hsien
Supervised by Shih, Chin-ts'un