The Taiwan Institute of Economic Research invited related companies to form a Strategic Alliance for the Research and Development of Battery-Powered Motorcycles, and sent a letter to the Commission asking for its opinion with respect to the timing of applying for approval to engage in a concerted act

Chinese Taipei

Case:

The Taiwan Institute of Economic Research invited related companies to form a Strategic Alliance for the Research and Development of Battery-Powered Motorcycles, and sent a letter to the Commission asking for its opinion with respect to the timing of applying for approval to engage in a concerted act

Key Words:

strategic alliance, joint research and development, apply to engage in a concerted act, legitimate reason, likely to obstruct fair competition

Reference:

Fair Trade Commission Decision of January 26, 2000 (the 429th Commissioners' Meeting); Letter (88) Kung Er Tzu No. 8816469-001

Industry:

Electrical and Electro-mechanical Equipment and Materials Production Repair and Replacement Industry (2190)

Relevant Laws:

Article 14 of the Fair Trade Law

Summary:

  1. The Taiwan Institute of Economic Research ("the Institute") invited San Yang, Kuang Yang, Asia-Pacific Energy, and other related companies, to form a Strategic Alliance for the Research and Development of Battery-Powered Motorcycles. The Institute initiated the alliance in support of the Environmental Protection Administration's Action Plan for the Development of Electric-Powered Motorcycles. Point two of the memo regarding the alliance stated that the specific content and future direction of the research and development plan could not be made clear until the alliance's establishment funds were received. Therefore, the Institute asked the Fair Trade Commission (the "Commission") in a letter to the Commission that pursuant to Article 14(1)(ii) of the Fair Trade Law if it could delay filing for approval to engage in joint research and development until the funds were received and the plan was completed.
  2. Article 14(1)(ii) of the Fair Trade Law provides that enterprises that have not been approved by the Commission may not engage in joint research and development on goods or markets for the purpose of upgrading technology, improving quality, reducing costs, or increasing efficiency.
    In its reply to the Institute, the Commission said that the plan initiated by the Institute constituted a concerted act under the aforesaid provision of the Fair Trade Law, and that an application for approval to engage in a concerted act must be filed with the Commission, as well as that the approval must be received before the plan could commence. Much in the regulations upon application requirements and related requisite documents was specifically related to the concrete parts of a plan, so there was a legitimate reason for requesting a delay. There would be no conflicts with the provisions related to concerted acts under the Fair Trade Law.
  3. Point two of the memo also stated that: "…it (the Institute)… shall coordinate the various work items…" First of all, this clause was too broad and unclear on its face. It seemed to leave open the possibility that, while coordinating the work items, the Institute might improperly or carelessly urge alliance members to engage in concerted acts such as engaging in mutually binding activities with respect to price, quantity, technology, products, equipment, or trading counterparts. Point three of the memo further stated that: "the establishment funds management committee…shall be responsible for making decisions regarding the utilization and handling of the establishment funds, the alliance membership entrance and exit, and other important matters related to the rights and interests of alliance members." This clause seemed to leave open the possibility that companies having specific mutual competitive relationships might engage in competitively unfair or obstructive acts likely to obstruct fair competition in violation of the Fair Trade Law. Therefore, there remain many doubts with respect to the contents of the alliance as expressed in the memo.
  4. In Summary, the Commission agreed that the filing for approval to engage in a concerted act could be delayed until the funds were received and the plan was completed. However, provided that the memo is executed, the Institute shall take related precautions to avoid any violations of the Fair Trade Law.


Summarized by He P'ei-wen
Supervised by Ma T'ai-ch'eng

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