Chin Nung Cheng retailer violated the Fair Trade Law for selling to a few retailers the goods which were supposed to be sold in consumer cooperatives
Chinese Taipei
Case:
Chin Nung Cheng retailer violated the Fair Trade Law for selling to a few retailers the goods which were supposed to be sold in consumer cooperatives
Key Words:
Consumer cooperatives, retailers, competitive edges
Reference:
Fair Trade Commission Decision of 5 February 1997(the 275th Commission Meeting); Disposition (86) Kung Ch'u Tzu No. 031
Industry:
Retail industry (5319)
Relevant Laws:
Article 24 of the Fair Trade Law
Summary:
1. Consumer cooperative [commissary] system has been a unique distribution system in the market of daily necessities in Chinese Taipei, which is protected by the law and the Constitution. Consumer cooperatives enjoy the privilege of tax exemption, and have the competitive advantage of low procurement cost derived from the large purchase quantity. The consumer cooperative system includes four sub-systems as follows:
(1) Consumer cooperatives in the authorities and public schools, and the Cooperatives Union.
(2) Branch stores operated by the Commissary Headquarters, the Ministry of Defense.
(3) City and county cooperatives unions.
(4) Consumer cooperatives of vocational organizations.
Pursuant to the provisions of the law, only those with specific occupations such as civil employees, teachers, servicemen, and laborers are allowed to shop at the aforementioned cooperatives. The commodities sold at these cooperatives are generally known as "commissary goods". In view of the fact that consumer cooperatives enjoy greater competitive advantages than the ordinary retailers, the Fair Trade Commission specifically requested that the cooperatives verify the identification of shoppers through inspection of their membership cards or purchase pass as provided for by the Cooperative Law. The Fair Trade Commission has imposed penalty on several consumer cooperatives which have violated Article 24 of the Fair Trade Law due to inadequate inspection of membership cards resulting in unfair competition against ordinary retailers. Some outlets that did not rectify the situation were even fined with the maximum monetary penalty up to NT$ 1 million for each instance.
2. In this case, a manufacturer delivered its goods to consumer cooperatives through a products delivery company, but the latter sold the very same batch of goods directly to a few retailers outside the consumer cooperative system. As consumer cooperatives enjoy tax exemption, and have the ability to conduct group negotiation, their purchase costs are usually lower than the general retailers. Taking into account the factors such as goods delivery, profits, and cost, manufacturers usually assign the delivery work for consumer cooperatives to delivery companies which however owns the products. In this case, Chin Nung Cheng Retailer, the products delivery company for the tissue products manufactured by Scott Paper Corporation in Chinmen area, sold Scott's paper products to the general retailers without permission, which was reported to the Commission by a dealer of Scott Paper Corporation in Chinmen area.
3. The Fair Trade Commission reached the following decisions:
(1) Though a term widely known to the general public, "commissary goods" has never been clearly defined or specified in relevant laws. As far as most people are concerned, all goods sold at consumer cooperatives may fall into the category of "commissary goods". However, the only criterion one can use in distinguishing whether or not a certain product is the so-called "commissary goods" is its final point of sale, i.e., the commodities sold at the aforesaid consumer cooperatives are classified as "commissary goods". In addition to this, other factors such as "price", "appearance", "content", and "type" can not serve as effective criteria for the aforesaid distinction. On the other hand, as long as the products are sold at the ordinary retail stores, they do not belong to the "commissary goods" category irrespective of price, appearance contents, or type of goods.
(2) Article 24 of the Fair Trade Law states that, 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. Accordingly, if one party's acts violate the principle of efficiency competition, for those who comply with the rules of the fair competition game, such acts are obviously unfair and harmful to the nature of fair competition in the market, and therefore are condemnable in terms of commercial ethics and constitute a violation of Article 24 of the Fair Trade Law. The sanctioned party sold to the general retail stores Scott's paper products it was commissioned to deliver, which can be evidenced by written records of the police office at Chinmen county, and by the results of the investigation conducted by the Commission. If Scott Paper Corporation or the sanctioned party sells generally to other retailers the products which are provided for sale to consumer cooperatives and violates no other laws, such an act may well be regarded as facilitating the flow of goods, which benefits general consumers, and helps level the playing field for members of the retail industry, and may not constitute a violation of the Fair Trade Law. Nonetheless, in this case only few retailers benefited from the delivery company's aforesaid act, which in a way disadvantages the other retailers in the market. Therefore, for those who comply with the rules of fair competition, the aforesaid act is obviously unfair and harmful to the nature of fair competition in the market. The acts of the sanctioned party thus can be concluded to be condemnable in terms of commercial competition ethics and constitutes a violation of Article 24 of the Fair Trade Law.
Summarized by Wu, Ting-hung
Supervised by Pai, Yu-chuang
＊: For information of translation, click here
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