Bristol-Myers Squibb (Taiwan) Ltd. and Nestle Taiwan Ltd.

Case:

Key Words:

sell, resale, out of stock

Reference:

Fair Trade Commission Decision of May 31, 2007 (the 812th Commissioners' Meeting); Disposition (96) Kung Ch'u Tzu No. 096010 and No. 096102

Industry:

Other Food Manufacturing Not Elsewhere Classified (0899)

Relevant Laws:

Article 18 of the Fair Trade Law

Summary:

1. This case originated from complaints submitted by pharmacies and lots of the general public to the FTC stating that: Bristol-Myers Squibb (Taiwan) Ltd. (hereinafter called "Bristol-Myers Squibb Company") required the pharmacies to sell Enfalac Infant Formula A+SA (900 gm/can) at the price of NT$539, and Nestle Taiwan Ltd. (hereinafter called "Nestle Company") also required them to sell Nan (Gold) H.A. Milk Powder (900 gm/can) at the price of NT$ 575.
2. Findings of FTC after investigation:
1. Bristol-Myers Squibb Company and Nestle Company conducted the sales of milk powder by firstly selling the products to the resellers, the resellers then re-sold them to the downstream channel partners; the products would be finally resold to consumers by the downstream channel partners, the pharmacies. The resellers and lots of pharmacies of the said two companies expressed that since the middle of 2005, Bristol-Myers Squibb Company and Nestle Company indeed, respectively, required them to sell the products at the prices stipulated by the said companies. Additionally, some pharmacies indicated that the two companies ever required them to sign the written agreements to agree on stick with the resale price. The companies retrieved the agreements later, however; the business representative informed the pharmacies orally that they shall coordinate. In order to make the pharmacies to abide by the stipulation of the sales price, Bristol-Myers Squibb Company made the pharmacies out of stock when they refused to coordinate.
2. Additionally, the findings of FTC on-the-spot investigation on the products in this case in more than ten counties/cities showed that the sales prices of Enfalac Infant Formula A+SA in each place were identical, so were the sales prices of Nan (Gold) H.A. Milk Powder.
3. Grounds for disposition:
1. As Bristol-Myers Squibb Company and Nestle Company were to sell milk powder to the resellers, which then re-sold them to the downstream channel partners, pharmacies, and the resellers and pharmacies were to earn profits themselves and bear the risks for not being able to sell the products, the fact that the two companies restrained the downstream resellers and pharmacies from re-selling their milk powder products at prices prohibited by the companies had deprived of the downstream enterprises' ability to determine prices without restraints and the downstream enterprises would be unable to offer reasonable prices based on their competitiveness and cost structures faced by them. The consequence of the acts would weaken the price competition of the same brand and the companies violated Article 18 of the Fair Trade Law.
2. After considering the relevant factors that the acts of restraining resale prices by Bristol-Myers Squibb Company and Nestle Company had affected the freedom of a lot of downstream enterprises on the determination of prices; they caused the prices of the products concerned in the market to be identical; the function of market competition was severely harmed; and in 2005, the market shares of the two companies in the milk power market at home were ranked first and fourth respectively, the FTC ordered the companies to cease the unlawful acts and Bristol-Myers Squibb Company was imposed with an administrative fine of NTD$4,000,000 and Nestle Company NTD$2,500,000.

Appendix:
Bristol-Myers Squibb (Taiwan) Ltd.'s Uniform Invoice Number: 11922609
Nestle Taiwan Ltd.'s Uniform Invoice Number: 20683002

Summarized by Lin, Hsin-Wen; Supervised by Wu, Pi-Ju