Correction Program on unreasonable pricing of ladies' underwear in the domestic market

Chinese Taipei

Case:

Correction Program on unreasonable pricing of ladies' underwear in the domestic market

Key Words:

corrective measures for the industry

Reference:

Fair Trade Commission of the 179th Commission Meeting

Industry:

Underwear Manufacturer (1422)

Relevant Laws:

Article 18 of the Fair Trade Law

Summary:

1. As for the trading of ladies' underwear in the domestic market, the resale price was often set by the upstream manufacturers, resulting in the downstream vendors unable to freely determine their sales price or to engage in sales promotion. Market order and consumer rights were thus adversely affected. Upon the implementation of Fair Trade Law, the Commission, in order to determine whether provision of the Fair Trade Law have been violated by the manufacturers or vendors, in 1993 took the initiative to investigate whether there were resale maintenance price agreements between upstream manufacturers and downstream vendors, or whether other unfair competition practices existed.

2. To understand the common trading practices, pricing strategy, marketing channel, price markings, and actual sale of the ladies' underwear products, the Commission, acting as a consumer, conducted investigations in different department stores as well as specialty and retail shops in northern, central, and southern Taiwan. The investigation focused on a specific type of ladies' underwear with high advertisement exposure, which were manufactured by two domestic manufacturers and two foreign manufacturers. The investigation found that apart from departments stores, which offered 10% discount upon presentation of VIP cards, the said type of underwear were sold at uniform price throughout the island. Cases where there was a marked difference between the labeled price and the actual selling price were not discovered. In addition, a survey conducted by the Commission showed that the underwear products are sold according to the affixed retail price tags, either at department store sales counters or in other specialty and retail shops. Since the resale price tags were affixed by the upstream manufacturers in the factory, a given kind of underwear for a given brandname thus have uniform selling price throughout the island. The situation may be due to the fact that ladies' underwear are available in different sizes and types, and a saleslady has to undergo special trainings to become familiar with the products. The salesladies, whose salaries are paid for by the manufacturers, are normally recruited and trained by the manufacturers themselves, and later assigned to the different department store sales counters or other specialty and retail shops. Since up to 80% of the sales outlets are handled by these salesladies, it is easy for a given kind of underwear with a given brandname to have a uniform selling price throughout the island. ]

3. Ladies' underwear in the domestic market have long had uniform prices. After the Fair Trade Law was implemented, despite an absence of written agreements on the resale price in the distribution contracts between the manufacturers and the department stores, the contracts have a provision which states, "the actual price shall not be higher than that of the retail stores." Violation of the said provision will constitute a breach of contract and will be penalized accordingly. Since ladies' underwear is sold in the domestic market according to the prices listed in the price tags, such provision in the contracts is deemed in violation of Article 18 of the Fair Trade Law . The Commission will invite representatives from the underwear manufacturers and department stores for symposiums to discuss issues related to the uniform selling prices throughout the island and the contents of the distribution contract. Corrective measures will be formulated for adoption by the industry.

Summarized by Liu, Jiou-ying
Supervised by Wu, Tsui-feng & Hsu Chao-ying

＠: For information of translation, click here

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