Lin Te-Chih of Lin’s Family restricted resale price and violated the Fair Trade Law

Chinese Taipei

Case:

Lin Te-Chih of Lin’s Family restricted resale price and violated the Fair Trade Law

Key Words:

Distribution, Resale

Reference:

Fair Trade Commission Decision of June 9, 2005 (the 709th Commissioners' Meeting), Disposition (94) Kung Ch’u Tzu No. 064

Industry:

Retail Sale of Fixture (4644)

Relevant Laws:

Article 18 of the Fair Trade Law

Summary:

1. This case originated from the complaint filed by one of the distributors of Lin’s Family, Mr. Chan to the Fair Trade Commission indicating that after he signed the distribution agreement with the Lin’s Family, he discovered Lin’s Family has sold products to him at prices higher than the market prices. Thereafter, a dispute arose between Mr. Chan and the Lin’s Family as Mr. Chan has reduced the selling price that further led to a termination of the agreement by the Lin’s Family.
2. The Fair Trade Commission’s investigation revealed the following: Lin’s Family is a sole proprietor that mainly sells ceramic mosaic DIY assembly material. After consumers buy the material packages from Lin’s Family or its distributors, they can assembly the materials into various designs on their own. Besides, the Lin’s Family also designed specific examples of patterns that were given to the consumers as assembly references. In addition , Lin’s Family admitted that the agreement indeed has included a stipulation that the products’ selling prices must be uniformly determined by Lin’s Family and the distributors are not allowed to reduce selling prices. Furthermore, Lin’s Family has send an attested letter registered with the post office to one of its distributors Mr. Chang stating to terminate the agreement after Lin’s Family discovered Mr. Chan has reduced products’ selling prices. With regard to the reasons of establishing the aforementioned stipulation, Lin’s Family indicated that one of the major reasons was to assure its own profit in other marketing channels and another reason was to protect various assembling designs developed by Lin’s Family, therefore, Lin’s Family only restricted the resale’s prices when the distributors sold the material sets together with the assembling designs of Lin’s Family.
3. Grounds for the disposition:
   1. The investigation result showed that it is true that Lin’s Family has included a stipulation in the agreement to restrict its distributors from reducing the products’ selling prices when they resell the products. In addition, when the distributors violate the said agreement, Lin’s Family will terminate the agreement to ensure the said stipulation was carried out effectively. Since the ownerships of the products were transferred to the distributors after being sold by Lin’s Family and the distributors have to find their own ways to resell the products for profits and bear the risks of not being able to sell out the products, therefore, the trading act of Lin’s Family in setting the resale prices for products sold to the distributors as well as ordering them to comply with the coordination measures in fact has restricted the business operations of downstream enterprises and deprived the distributors’ capabilities to determine their prices freely. The distributors were not able to determine reasonable prices according to the market competition conditions and cost structures faced by each individual distributor, and consequently, the price competitions among distributors for products of the same brand were reduced and the function of market competition is hindered. The act thus has violated the provision of Article 18 of the Fair Trade Law.
   2. Taking into consideration that Lin’s Family only operated its business mentioned in this case for approximately more than one year, its operating condition was not yet perfect and furthermore there were only two distributors signing distribution agreements with Lin’s Family, hence the effect of the unlawful act to market order should be very insignificant. In addition , considering that Lin’s Family has shown good attitude of cooperation in the investigation, the Fair Trade Commission therefore orders Lin’s Family to cease its unlawful act with an administrative penalty of NT$50,000.

Summarized by Lin, Hsin-Wen;
Supervised by Chen, Yuhn-Shan

Appendix:

Lin’s Family’s Uniform Invoice Number: 99438356