The Study on the regulations imposed by the Fair Trade Law on trade associations
Chinese Taipei
Case:
The Study on the regulations imposed by the Fair Trade Law on trade associations
Key Words:
trade association, enterprise, restricting, concerted actions, exemptions
Reference:
Fair Trade Commission Decision of 16 June 1993 (the 89th Commission Meeting)
Industry:
Trade association (8251)
Relevant Laws:
Summary:
1. The background: The Fair Trade Law came into effect on 4 February 1992, and trade associations are referred to as "enterprises" under Article 2, subject to the regulations of this Law just as are companies and industrial or commercial firms. In view of the fact that trade associations are established with the objective of coordinating the relationship among members of the same industry, enhancing their common interests, and facilitating social and economic development, the applicability of the Fair Trade Law to them and their behavior therefore quite attracts public attention. In order to help trade associations understand and implement the relevant regulations under the Fair Trade Law, having taken into account the relevant rules and regulations of the US, Japan, Germany and Korea, and public opinions generated from several seminars held by this Commission and participated by scholars, specialists, representatives of trade associations, and officials of government agencies, this Commission provide this paper.
The purpose for developing this paper is to assist trade associations in understanding of the relevant regulations in the Fair Trade Law so as to secure their compliance with them, and to serve as reference for the Commission when handling relevant cases. However, the illustration of this paper only takes examples of past acts of trade associations which may be violations of the Fair Trade Law, and may not be as comprehensive and complete as the Commission would like it to be, so in the future, each case shall still be dealt with on a case by case basis.
2. The following acts conducted by trade associations may be in violation of the Fair Trade Law:
(1) Preventing enterprises from entry into or exit from specific markets.
(2) Undertaking the following to restrict the competition in a specific market, thus hindering the market mechanism:
(i) Restricting the kinds, specifications or types of products or services. a. Assigning members to produce specific types and specifications of products or services so as to regulate collectively the products manufactured or services sold, or to build up the monopoly power of an enterprise. b. Restricting the transportation of new products by refusing to issue proper approvals, or placing restrictions on the selling time of new products.
(ii) Restricting the expansion of production capacity or service scale. Trade associations may restrict production capacity by placing limitations on the replacement or expansion of members' equipment and on the installation of machinery. In addition, they may control the expansion of production capacity and service scale by imposing restrictions on enterprises' advertisements, introduction of technology, R & D, or on the location, content and methods of business operations, thus hindering competition in the market.
(iii) Restricting the manufacturing, transportation or sale of products, and restricting the supply of services. These restrictions may be imposed in the form of quantitative control, e.g., ceilings and floors of production and sales volume, inventory, production time, and the procurement of raw materials. The restrictions may also be in the form of qualitative control such as restraint by the standard of the manufacturing or selling of products, or the provision of services. Some common acts trade associations have conducted in the past in this regard are cited and explained below: a. Trade associations negotiated with their members to restrict production: For example, during the June 3rd Flood of 1984, some associations persuaded their members to take a collective leave and to reduce their production, thus leading to fluctuation in market prices. b. Trade associations restricted goods delivery: Some local associations have been involved in members' negotiation on reduction of production, and even allocated the production volume among members and restricted the quantity of products delivered by its members. c. Trade associations set up cooperatives for collective procurement: By taking advantage of such cooperatives, some associations negotiated selling prices for their large amount of procurement restrained contain activities of other enterprises by means of agreements reached among them.
(iv) The negotiation, determination, announcement, maintenance or alteration of the prices of products or services sold or provided by members of trade associations.
(v) Restricting the trade area or trading counterparts of certain products or services: a. Restricting the trade area or trading counterparts of association members through concerted action or division [of markets]. b. Restraining association members from receiving orders or obtaining the bidding right. c. Limiting the trading counterparts or an association member may deal based on the status of such, which is given by the association member without specific or reasonable criteria.
(vi) Jointly deciding the terms of (products) sales, terms for the provision of services, or other related requirements for transactions or payments: for example, some associations developed standard contract terms and conditions for members or facilitated members to take concerted actions on collection of payments methods of providing service, time of payment, terms of payment, delivery points, delivery method, and time, content and method of after sale services, which may constitute violations of the Fair Trade Law.
(3) Making international agreements or contracts the contents of which constitute improper trading restraints or unfair trading acts.
(4) Making its members give discriminatory treatment to another enterprises or engaging in unfair trading acts.
(5) Other improper concerted actions which restrict competition in specific markets.
3. Exemptions from the Fair Trade Law:
(1) Activities which have been granted permission to take place under the provisions of Article 14 of the Fair Trade Law.
(2) Activities pursuant to the provisions of other laws.
(3) Activities conducted by state enterprises, public utilities, or transportation and communications enterprises within five years after the promulgation of the Fair Trade Law and been granted approval.
4. Provided that the activities trade associations engage in do not involve any of the aforesaid "acts which may be in violation of the Fair trade Law," and are in compliance with the relevant provisions of the Business Association Law and the Industrial Association Law, they would not contravene the provisions of the Fair Trade Law. For example,
(1) Collecting information about the industry for their members' reference.
(2) Conducting research and development on management skills and providing training and education for their members in this respect.
5. If self-regulating concords of trade associations involve the concerted activities specified in the Fair Trade Law, the associations in question will still need to explain or apply for an approval from the Fair Trade Commission. The following is some examples:
(1) Developing a set of non-compulsory self-policing standards for specifications or quality with the objective of enhancing business efficiency and facilitating the purchase decision of general consumers.
(2) Developing a set of non-compulsory reasonable self-regulating rules for the purpose of avoiding acts of unfair competition, such as excessive giveaways or free presents, untrue and exaggerated advertisements.
(3) All acts mentioned above under section 2 of this paper.
Summarized by Cheng, Peng-chi
Supervised by Chen, Ming-huang
＊＊: For information of translation, click here
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