Violation of Article 24 of the Fair Trade Law [FTL] by PresiCarre Corp. [respondent] for abusing its advantageous market position to exclude the suppliers from competition thereby adversely affecting the trading order
Chinese Taipei
Case:
Violation of Article 24 of the Fair Trade Law [FTL] by PresiCarre Corp. [respondent] for abusing its advantageous market position to exclude the suppliers from competition thereby adversely affecting the trading order
Key words:
sufficient to adversely affect the trading order, patently unfair act
Reference:
Fair Trade Commission Decisions of 8 April 1998 and 22 April 1998 (the 335th and the 337th Commission Meetings); Disposition (87) Kung Ch'u Tzu No. 098
Industry:
General Commodities Wholesale Industry (5110), Retail-style Bulk Sales Industry (5314)
Relevant Laws:
Article 24 of the Fair Trade Law
Summary:
The complainant was one of the respondent's suppliers. The complainant and the respondent signed an agreement in 1997, the term of which was from 1 January 1997 through 31 December 1997. In accordance with the agreement “ PresiCarre Corp. will provide services in relation to arranging and selecting goods to be distributed nationwide and guarantees to distribute goods supplied by the supplier” Thus, the complainant agreed to pay NT$800,000 for the cost of displaying for sale the household appliance products, it supplied, including Kuo T'eng drinking water fountain. However, in October 1997, the respondent purchased the fountains directly from the fountain manufacturer and distributed them at NT$999 per unit, which was far lower than the wholesale price at which the complainant could supply them.
The FTC found that the respondent was operating retail and wholesale bulk sales chain stores and had contracted about 3,500 suppliers nationwide. The respondent [customarily] signed with suppliers an agreement containing a “sale guarantee” provision, based on which it collected from them a service fee for the cost of displaying their goods for sale. The FTC found that the respondent, by its advantageous position of having ten or more chain stores nation-wide, placed bulk orders for sale promotion, thereby impairing the normal trading order of supply. Detailed reasons for the finding include:
(1) The respondent's business value was about NT$24 billion for the year 1996 which took 35.66% of NT$67.3 billion the nationwide total bulk sales industry value of the same year. This indicated that the respondent had occupied an influential market position. In contrast to the complainant, whose business value was about NT$30 million per year, the respondent had a comparatively stronger position in competition.
(2) In October 1997, for its national sales promotion campaign, the respondent purchased 10,000 units of the water fountains in one order directly from the manufacturer. (Such quantity was one tenth of the manufacturer's total annual sales.) Such action adversely affected the complainant's normal sales operation for the fountains. The complainant eventually had to withdraw from operation of sale for the fountains. Thus, the FTC found the respondent's act was sufficient to adversely affect the normal trading order for supply of the water fountains.
(3) The respondent signed the agreement with the complainant in 1997 and collected a display service fee of NT$800,000. However, the respondent failed to inform the complainant that an anniversary sales promotion campaign might exclude its supply and failed to include compensatory provision in the agreement for such exclusion. Accordingly, the complainant could not foresee the operational risk, had to suffer difficulties and eventually discontinued sales of the water fountains. Therefore, the FTC found that the respondent had abused its comparatively advantageous position, which was patently unfair to the complainant.
In conclusion, the respondent collected a display service fee from its suppliers, but failed to inform the suppliers that their supply might be excluded from the respondent's anniversary sales promotion campaign and failed to specify in the agreement a compensatory provision regarding such exclusion. The respondent excluded the supplier from competition by taking advantage of placing bulk orders directly with the manufacturer, which action was sufficient to adversely affect the normal trading order of the water fountains. The FTC decided that the respondent violated Article 24 of the Fair Trade Law, and in accordance with Article 41 of the Fair Trade Law ordered the respondent to cease its patently unfair act which was sufficient to adversely affect the trading order.
Summarized by Lin, Chin-lang
Supervised by Hsu, Shu-hsing