Complaint against Taiwan Fuji Xerox Co. for monopolistic pricing involving component parts of photocopy machines
Chinese Taipei
Case:
Complaint against Taiwan Fuji Xerox Co. for monopolistic pricing involving component parts of photocopy machines
Key Words:
photocopy machine, improper selling price, monopoly, tie-in, improper restriction
Reference:
Fair Trade Commission Decision of March 5, 1997 (the 279th Commission Meeting); Disposition (86) Kung Er Tzu No. 85002282101
Industry:
Machinery Manufacturing and Repair Industry (2180)
Relevant Laws:
Summary:
1. A user of Taiwan Fuji Xerox Co.'s ("Xerox Co.") copy machine wrote a letter to this Commission complaining that he bought fourteen V-500 copy machines from the Xerox Co. in 1992. Upon the replacement of component parts, he found that, according to the component parts price list, the prices for the paper feeding wheel set was NT$16,200, for the main power supplier NT$17,067, and for the ancillary power supplier NT$8,492. His market price survey showed that a top quality main or ancillary power supplier of the said specification were only slightly more than NT$3,000; also, the selling prices of all the wheel sets of Xerox Co. were over-priced. It was suspected that the Xerox Co. intended to make an improperly high profit. He therefore sent the letter to this Commission to investigate whether the Xerox Co. had abused its market power by monopolizing or improperly setting prices.
2. With regard to the market structure and the sales agents' market power of copy machines component parts, the Commission found that the component parts of all brands of copy machines either had their original equipment agents or were imported by parallel importers from foreign countries, and that in the domestic market there were no standardized component parts for all brands. There were no substitute component parts among different brands of copy machines; therefore, the component parts of each specific copy machine was a unique market. As far as the market status of the respective sales agents was concerned, 80% of users sought maintenance services from the original equipment agents, and parallel importers only had about 3% of the market. Furthermore, even though there were substantial differences in the copy machines component parts' selling prices between domestic agents and the parallel importers, the agents did not have the intention to compete with the parallel importers in selling prices. We thus conclude that each of the domestic sales agents enjoyed a superior market status in respect of its copy machine brand.
3. As to whether Xerox Co. used its superior market power to make improper decisions on the prices of copy machines component parts, we have investigated the relevant financial reports of Xerox Co. The investigations showed that although the selling prices on copy machines' component parts were much higher than their costs (some of which were only 10% of their sales price), their after-tax net profit was only 3% since the operation costs of said company was as much as 35% of net revenues. Therefore, it can not concluded that the selling prices were improper simply because they were far higher than the material costs. We further found that even though the selling prices of the said company's component parts were higher than the parallel import goods, the parallel importers only imported those parts that had a high demand. They neither provide maintenance nor technical services; thus, their costs for stocking and personnel were lower than the party against which the complaint was made. As a result, based on the prices difference for copy machines parts between the parallel importers and Xerox Co., we can not find that Xerox improperly set the selling prices for component parts.
4. Furthermore, the complainant stated that the copy machine in question was not of a type which Xerox Co., as a sales agent, was authorized to sell. Considering the technical know-how, it would be difficult for the complainant to obtain maintenance services from any third parties other than Xerox Co. However, we found that all sales agents of Xerox Co. did provide maintenance services to consumers and that in practice, Xerox Co. did not set any restrictions on its sales agents in providing maintenance services for the types of copy machines which it had not been authorized to sell. Therefore, if the complainant considered the selling prices of the component parts of Xerox Co.'s copy machines too high, he could have bargained with Xerox Co. for a better price or used the parallel imported parts and requested maintenance services from Xerox Co. and/or other maintenance providers. Accordingly, no evidence proved that Xerox Co. has improperly restricted its trading counterpart.
5. It is characteristic of the copy machine market that each copy machine agent has a superior market power in the component parts for which type of machine it supplies. This Commission found that some agents used contracts or other methods to require that their sales agents or consumers purchase the copy machines parts solely from them, for which they defended the purposes were safety, quality control and protection of business reputation. However, it was these restrictive measures that restricted the market competition of copy machine component parts. We do not exclude that their acts, e.g. attempt to monopolize the market of copy machines components parts by using exclusive supply contracts, are in violation of the Article 19(vi) or Article 24 of the Fair Trade Law. We further found that some of the agents had refused to provide the component parts for copy machines. Based the agents' superior market powers in respect of copy machines parts, they may violate Article 19(vi) of the Fair Trade Law for tie-in arrangement or Article 24 for obviously unfair practice, if they refuse to supply the component parts or if their reasons for refusing to supply the component parts clearly violate normal business ethics. Accordingly this Commission issues a warning letter to the domestic sales agents of imported copying machines, relevant associations and consumer protection organizations in order to avoid violations of the Law in the future for these reasons.
Summarized by Liu, shi-rong
Supervised by Yang, Chia-jiunn
＊＊: For information of translation, click here
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