Shan Yun Construction Consulting Co., Ltd. and Anmei Design Consulting Co., Ltd. jointly engaged in deceptive/obviously unfair acts, e.g. disguised designation of brands, affecting trading order

Chinese Taipei

Case:

Shan Yun Construction Consulting Co., Ltd. and Anmei Design Consulting Co., Ltd. jointly engaged in deceptive/obviously unfair acts, e.g. disguised designation of brands, affecting trading order

Key Words:

deceptive or obviously unfair act, design company, disguised designation of brands, bid manipulation

Reference:

Fair Trade Commission Decision of 15 February 1995 (the 175th Commission Meeting), Letter (84) Kung Erh Tzu No. 01478 and Disposition (84) Kung Ch'u Tzu No. 023

Industry:

Architecture and Construction Technical Service Industry (7200)

Relevant Laws:

Article 24 of the Fair Trade Law

Summary:

1. This case involved the bidding operation for "Eutectic Salt Cooling System," a major component for the air-condition system of the Second Laboratory Building of Polytechnic School of National Chung Shan University ("NCSU"). In the bidding requirements, manufacturers of eutectic salt were limited to certain companies such as Transphase, Cabot and Dow. Furthermore, the following facts indicated disguised designation of Transphase's eutectic salt through unreasonable bid-manipulating clauses: (i) the specification of the dielectric container of eutectic salt required 24" x 1.75" x 8", for which only Transphase was qualified; (ii) proof of agency in Chinese Taipei was required. Based upon the above facts, a complaint was brought to this Commission accusing of the obvious bid-manipulation. The complaint also pointed out that Shan Yun Construction Consulting Co., Ltd. was designated as the designer, which commissioned Lin Jung-chi for the design works. Lin Jung-chi worked concurrently for Fan Mei Co. (transliteration), an agency for Transphase.

2. The bidding requirements listed three eutectic salt manufacturers, Transphase, Dow and Cabot; it also required the proof of agents in Chinese Taipei. Notwithstanding the seemingly neutral specification of 24" x 1.75" x 8", Transphase was the only manufacturer whose product met the requirement, who was also the only company that had an agent in Chinese Taipei. These facts were admitted by Shan Yun and Anmei. Article 43 of the Enforcement Rules of the Audit Law stipulates that "in the event of any necessity to use patented products or designate brands, there shall be, in principle, a precondition that no other goods with identical quality for substitution... For any specific item exceeding a certain monetary amount, reasons shall be specified and submitted to the superior authorities for approval." During the contracted term for design, the NCSU expressly instructed Shan Yun to have more than three brands for choice (i.e., no disguised designation of any exclusive brand). As bidding companies questioned the alleged disguised designation of an exclusive brand, the NCSU also issued a written notice to Shan Yu for explanation. In response, Shan Yun claimed no unlawful act was ever committed. Without changing the specification, Shan Yun altered the bidding requirements for the second tendering (November 1993), which stated: "... name of eutectic salt manufacturer for reference: Transphase System Inc." Its attempt to designate an exclusive brand was obvious. In view of the commission relationship between Shan Yun and the NCSU, Shan Yu's disguised designation of a brand ran contrary to the NCSU's instruction that no disguised designation be attempted.

3. Shan Yun was commissioned with the construction design works for the Second Laboratory Building of Polytechnic School of the NCSU, and then Shan Yun sub -contracted the design of the air-conditioning system to Anmei. According to this Commission's investigation, Anmei's disguised designation of an exclusive brand during the design period was a fact known to Shan Yun, who, however, did not raise any opposition. Under such circumstance that both Shan Yun and Anmei were cognizant of the disguised designation of an exclusive brand and had mutual understanding therefor, they further included such disguised designation into the bidding requirements that was submitted to the NCSU. Thus, Anmei's disguised designation of an exclusive brand became an act of Shan Yun. Subjectively, both companies were aware of the disguised designation, and objectively, they could be considered to have committed a joint act. Therefore, they should be jointly and severally liable for the act which misled the retaining party and the bidders, and thus undermined the order of trade. In addition, Lin Jun-chi, Anmei's responsible person, holds 75% of Anmei's total capital and 62.5% of Fan Mei. The concurrent ownership of these two companies proved the close relationship between the two companies. There is sufficient ground to find that Anmei's acts would increase the trade opportunity of Fan Mei; the above-discussed disguised designation of Transphase's eutectic salt was one of such acts.

4. Any enterprise engaging in a deceptive or obviously unfair act to the extent of undermining the order of trade violates Article 24 of the Fair Trade Law. Although Shan Yun and Anmei were not direct trading counterparts of the bidding companies, they were subject to Article 24 of the Fair Trade Law if their acts undermined the order of trade protected thereunder. In this case, Shan Yuan and Anmei set the specification of eutectic salt and the requirement for a local agent, resulting in disguised designation of Transphase and causing the retaining party, bidding companies and bid winners to have mistrusted in the plurality of manufacturers involved. In addition, such act also created a market access barrier and seriously undermined the order of trade. Furthermore, Lin Jung-chi, Anmei's responsible person, also ran an eutectic salt distributorship for Transphase. Thus, the joint acts of Shan Yun and Anmei were obviously deceptive and unfair, were contrary to the principle of good faith in business competition, and damaged the order of competition. Therefore, it is adequate to find that these companies have violated Article 24 of the Fair Trade Law.

　

Summarized by Yang, Chia-chun
Supervised by Yang, Chia-chun

Appendix:
Shan Yun Construction Consulting Co., Ltd.'s Uniform Invoice No.: 20732215
Anmei Design Consulting Co., Ltd.'s Uniform Invoice No.: 14083543

＠: For information of translation, click here

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