Cross complaints of violation of the Fair Trade Law by Wen Shan Cable Broadcasting System Co., Ltd. and Hsin Tang Cheng Development Co., Ltd.
Chinese Taipei
Case:
Cross complaints of violation of the Fair Trade Law by Wen Shan Cable Broadcasting System Co., Ltd. and Hsin Tang Cheng Development Co., Ltd.
Key Words:
low price enticement, obviously unfair acts
Reference:
Fair Trade Commission Decision of April 30, 1997 (the 287th Commission Meeting); Disposition (86) Kung Chu Tzu No .076 and 077
Industry:
Cable TV Industry (8520)
Relevant Laws:
Article 19(iii) and Article 24 of the Fair Trade Law
Summary:
1. Wen Shan Cable Broadcasting System Co., Ltd. ["Wen Shan Company"] and Hsin Tang Cheng Development Co., Ltd ["Hsin Tang Cheng Company"] are both cable TV system operators in Hsin Tien area. In November 1996, Hsin Tang Cheng Company printed and disseminated fliers to which a newspaper clipping was attached reporting the public notice of the Taipei District Court's decision on the auction of Wen Shan Company's sequestered chattels. Also included in the fliers were derogatory lines against Wen Shan Company such as "if not now, when are you going to switch your system operator?" However, the said auction of chattels was eventually not implemented, because Wen Shan Company reached a settlement with its creditors, for which the Company had released news. Therefore, Wen Shan Company regarded Hsin Tang Cheng Company's above-mentioned act a violation of the Fair Trade Law, and reported to the Commission. On the other hand, Wen Shan Company launched a special offer in November 1996, offering that consumers holding a receipt issued by "Hsin X Cheng Company" would only have to pay NT$ 100 for the first year subscription if they switched to Wen Shan Company. Hsin Tang Cheng Company regarded such offer an improper enticement in the form of predatory low prices for the purpose of soliciting the Hsin Tang Cheng Company's existing subscribers, and thus reported to the Commission for the violation.
2. The investigation showed that the content of Hsin Tang Cheng Company's flier was a copy of a news report published in Min Chung Daily News of 25 October 1996. A note was added on the top of the flier saying "if not now, when are you going to switch your system operator?" and "Wen Shan Cable TV blew it?", all in boldface characters. The newspaper clipping was a public notice on the then soon-to-be-held auction by the court, which was later canceled because of a settlement reached between the Wen Shan Company and its creditors. Nevertheless, it did not mean there was anything untrue in the said news report, which was included by the flier in question together with the boldfaced notes. They did not constitute obviously untrue statements or misinformation, and thus there was no violation of Article 22 of the Fair Trade Law, which provides "no enterprise shall, for the purpose of competition, fabricate or disseminate any untrue statement or misinformation that will injure the business reputation of another." However, even though the content of the flier in question was not obviously untrue and therefore did not constitute a violation of Article 22 of the Fair Trade Law, Hsin Tang Cheng Company's acts were subject to challenges of commercial competition ethics. In terms of commercial competition ethics, Hsin Tang Cheng Company should have used normal means of competition in prices, quality, and services, rather than appealing to its competitor's auction notice and lawsuit with third parties. Furthermore, the auction was on the office facilities of Wen Shan Company and did not include facilities such as those in the cable facility room or the broadcasting network that were essential to a cable operator's services. Therefore, Hsin Tang Cheng Company's act of using the flier in question to imply that Wen Shan Company would, as a result of the auction, be financially strapped and the interests of its subscribers would be damaged was indeed an exaggeration of the negative impact of the auction. The subscribers of the Wen Shan Company might thus question its ability of operation in the future; the order of trade in the particular market was thus influenced. Accordingly, Hsin Tang Cheng Company's acts were obviously unfair acts that could adversely affect the order of trade as set forth in Article 24 of the Fair Trade Law. Hsin Tang Cheng Company shall cease the dissemination of the said flier pursuant to the first half of Article 41 of the same Law.
3. With respect to the complaint against Wen Shan Company, the company explained that the said special offer was an attempt to prove its financial viability in response to the fliers disseminated by Hsin Tang Cheng Company in November 1996. The specific offer allowed customers holding the receipts issued by the Hisn X Cheng Company to pay only NT$ 100 for the first year subscription if they switched to Wen Shan. Wen Shan Company believed that its special offer was a price competition and would not raise concerns of fair trade; on the contrary, it could contribute to market competition. Although price competition is permissible under the Fair Trade Law, it would constitute a monetary enticement if it is conducted in a predatory manner or is intended to drive the competitors out of market. In this case, Wen Shan Company admitted that the monthly fee for its services was usually NT$ 600, and quarterly fee would be NT$ 1500. Special offers were launched from time to time, e.g., NT$ 2999 for an annual lump-sum payment for the fees. On the other hand, the Commission surveyed the cable TV industry and found out that currently the monthly fee was NT$ 600 and annual fee NT$ 6,000 in most cases. Therefore, the price of NT$ 100 for a year's subscription was obviously too low whether compared with Wen Shan Company's own regular charging standards or with other operators' prices. The channels covered by Wen Shan Company were also relatively complete; therefore its said overly low price would be sufficient to influence the viewers of cable TV programs in their choice of trading counterparts, thus constituting a monetary enticement. Furthermore, the special offer targeted the existing subscribers of Hsin Tang Cheng Company, which was Wen Shan Company's main competitor. It was obvious that Wen Shan Company intended to entice the existing customers of Hsin Tang Cheng Company with unduly low prices. In other words, the act of monetary enticement aimed at the trading counterparts of its competitor, which fit the description of certain acts set out in Article 19(iii) of the Fair Trade Law, i.e., "causing the trading counterpart of a competitor to enter into a trade with the enterprise itself by monetary enticement, and thus causing concerns that fair trade may be hindered." The Commission found such act in violation of the Fair Trade Law and shall have the enterprise in question cease the acts pursuant to the first half of Article 41 of the same Law.
Summarized by Liao, Hsien-chou
Supervised by Hsin, Chih-chung
Appendix:
Hisn Tang Cheng Development Co., Ltd.'s Uniform Invoice Number: 89886262
Wen Shan Cable Broadcasting System Co., Ltd.'s Uniform Invoice Number: 84697376
＊＊: For information of translation, click here
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