Correction program on the distribution and sale system of the motorcycle industry
Chinese Taipei
Case:
Correction program on the distribution and sale system of the motorcycle industry
Key Words:
resale price, territorial restrictions, restrictions on trading partners, formation of exclusive distributor
Reference:
Fair Trade Commission Decision of February 12, 1996(the 276th Commission Meeting); Disposition(86) Kung Erh Tzu No. 8800044-010
Industry:
Vehicle Industry (3241)
Relevant Laws:
Article 18 and Article 19(iv) & (vi) of the Fair Trade Law
Summary:
1. This case originated from the 223rd Commission Meeting dated January 17, 1996, which adopted the following resolutions in respect of the distribution system and sales activities of the motorcycle industry:
(1) Some of the domestic motorcycle enterprises, through the establishment of management companies, ownership of stock, or the appointment of manager, directly or indirectly controlled the general distributors in various counties and cities. The said enterprises engaged in unfair competition practices such as setting the resale price, restricting the sales territory or the trading counterparts, and causing the regional distributors to jointly form the general distributor. The motorcycle market was of a highly oligopolistic structure and the said motorcycle manufacturers had apparent market powers to influence the supply and demand. Furthermore, it has not been proved that the economic benefits of the existing marketing system, the resale price maintenance, and the territorial restrictions outweighs its negative economic impact; neither has it been proved that these acts were implemented for inter-brand competitions. Therefore, it should be concluded that these acts, due to their tendency of restricting fair competition, constituted violations of Article 18 and Article 19(iv) & (vi) of the Fair Trade Law
(2) The above activities are widespread in the sales/distribution system of the motorcycle industry and there is a historical background for them. In accordance with the resolution of the 157th Commission Meeting, in the event the violation by an enterprise is long-standing and it is a wide-spread practice within the industry that requires overall correction, industry-wide corrective measures shall be , in principle, implemented first. Therefore it is resolved that corrective measures be implemented with respect to the aforementioned motorcycle industry that have engaged in marketing activities in violation of the Law. In addition, to ensure a healthy environment for competition in the motorcycle market, warnings will also be issued to motorcycle enterprises whose marketing activities tend to violate the provisions of this Law.
2. Contents of the Corrective Measures and Warning Program:
(1) The motorcycle manufacturing or sales enterprises, when dealing with their trading counterparts, shall not in any manner restrict or set the resale prices.
(2) A motorcycle manufacturing enterprise with a certain market power shall not, through improper means (such as imposing penalties on the violators, withholding supply of new models, or imposing other substantial sanctions), allocate or restrict the sales territory or trading counterparts for the regional dealers, or engage in other unfair competition practices.
(3) A motorcycle manufacturing enterprise with a certain market power shall not, through improper means, engage in unfair competition practices such as causing other enterprises to form a general distributor (e.g., the manufacturer demanding that the downstream distributors who are in competition with each other jointly form an organization for concerted actions, by using the terms and conditions for product supply, or by using its more advantageous position).
(4) A motorcycle manufacturing enterprise with a certain market power shall not, through appointing managers or through direct ownership of shares, control the business operations of the downstream distributors. In addition, such enterprise shall, within six months from the announcement of these Guidelines, recall the aforementioned managers. In the event a motorcycle manufacturer has control over its downstream distributors through ownership of shares such enterprise shall, within six months, change such relationship into a pure investment relationship. If the business relationship is one of combination, an application for such combination shall be filed with this Commission for approval.
(5) It is inappropriate for motorcycle manufacturing/sales enterprises, technology providers, service-provider of market information/management, through improper methods (such as imposing penalties on the violators, withholding supply of new models, or imposing other substantial sanctions), allocate or restrict the sales territory or trading counterparts for the regional dealers, or engage in other unfair competition practices.
(6) It is inappropriate for motorcycle manufacturing/sales enterprises, technology providers, service-provider of market information/management, through improper means, engage in unfair competition practices such as causing other enterprises to form a general distributor.
(7) It is inappropriate for a motorcycle manufacturing enterprise to refuse to sell, without justifiable reasons, its brand motorcycles to distributors within the brandname distribution system, or to motorcycle stores not associated with brandname systems. It is also inappropriate for distributors to refuse to sell, without justifiable reasons, its brand motorcycles to distributors within the brandname distribution system,, or to motorcycle stores not associated with brandname systems.
(8) It is inappropriate for motorcycle distributors, through shareholders' meetings or board meetings, to jointly restrict or set the resale price for the regional distributors, dedicated motorcycle shops, or other shops. Neither is it appropriate for them to jointly cause others not to engage in price competition or engage in concerted actions, or to restrict, through improper means, the business operations of the trading counterparts. Such actions may be held as violation of the regulations governing vertical and horizontal concerted actions under Articles 14 and 19 of the Fair Trade Law.
3. Period for Corrective Measures: The above Corrective Measures shall take effect at their announcement on March 7, 1997, with the exceptions of those related to "recall of the appointed managers" and "adjustment of ownership relationship " given in item(4) of the contents of the Corrective Measures and Warning Program, which shall be completed within six months from the announcement .
Summarized by Lin, Tsing-tang
Supervised by Yang, Chia-hun
＠: For information of translation, click here
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