Deltamac (Taiwan) Co. Ltd.

Case:

Key Words:

hiring of motion picture films, motion picture and video distribution, dominant position, obviously unfair

Reference:

Fair Trade Commission Decision of June 14, 2007 (the 816th Commissioners' Meeting); Disposition Kung Ch'u Tzu No. 096117

Industry:

Motion Picture and Video Distribution (5913)

Relevant Laws:

Article 24 of the Fair Trade Law

Summary:

1. This case originated from the media report stating that Deltamac (Taiwan) Co. Ltd., upon its dominant position, drafted unfair contracts and withheld the contract based on the ground that the company intended to imprint the contracts with the company seal. The company constituted a deceit or an obviously unfair act sufficient to affect trading order, therefore the FTC initiated an investigation.
2. Findings of FTC after investigation: As motion picture products, such as VCD, DVD, contain copyrighted products so they have the characteristic that they cannot be substituted; in addition, the current practice shows that distributors of motion picture products mainly acquire the sole agency rights from upstream film makers and producers; and besides trading with distribution enterprises, or their agencies, resellers, it is difficult for rental enterprises to acquire complete and sufficient resources from the sources through other legal channels. Therefore, compared to rental enterprises, distribution enterprises have exclusive and powerful economic strength and the market power of distribution enterprises and rental enterprises respectively are not equal. The evidence that Deltamac (Taiwan) Co. Ltd. distributed the types of motion picture films which were in the main stream and had higher market share and the information which was purchased by large chain stores, showed that the sales quantity of the motion picture films distributed by Deltamac (Taiwan) Co. Ltd. and the level of consumers’ fondness for the motion picture films were all in the leading position, and Deltamac (Taiwan) Co. Ltd. had quite competitiveness in the distribution market.
3. Grounds for disposition and decision:
   1. It was found that Deltamac (Taiwan) Co. Ltd. acquired the agency right to distribute 180 films for film manufacturing companies in 2005, and operated the rental business on motion picture products; in the same way, from September to November in 2005, the business personnel of Deltamac (Taiwan) Co. Ltd. or the county/city agencies signed 2006 Deltamac Digital Alliance Contracts with hundreds of rental enterprises, to stipulate key clauses, the period of the contract, the object, scope of rights, termination of contract and guarantees. The rental enterprise was one of the contracting parties; it had the right to comprehend the content of the contract and claimed its rights in terms of the contract. However, it was found again that Deltamac (Taiwan) Co. Ltd. had withheld hundreds of contracts from the trading counterparts of the contracts, the rental enterprises until April 2006, as it based on its grounds that it intended to imprint the contracts with the company seal or parties had not agreed on the date of handing over the contracts to the rental enterprises, to veil its intention, which was to detain most of the contracts for more than five months. Such an act affected the trading counterparts’ opportunities to comprehend rights and benefits and to claim these rights, and showed that Deltamac (Taiwan) Co. Ltd. relied on its dominant position against the rental enterprises which had relative disadvantaged position. Without doubts, the act was sufficient to affect trading order.
   2. In conclusion, Deltamac (Taiwan) Co. Ltd. improperly withheld the contracts after it and the trading counterparts concluded them. This fact constituted an obviously unfair circumstance sufficient to affect trading order and Deltamac (Taiwan) Co. Ltd. violated Article 24 of the Fair Trade Law. After considering the motive, purpose and anticipated improper profits of the unlawful acts of Deltamac (Taiwan) Co. Ltd.; the degree and duration of the unlawful acts' harm to trading order; the benefits derived on account of the unlawful acts; the scale, operating condition and market position of the enterprise; whether or not the types of unlawful acts involved in the violation have been corrected or warned by the Central Competent Authority; the types and numbers of and intervals between past violations, and the punishment for such violations; the remorse shown for the acts and attitude of cooperation in the investigation; and other factors, the FTC imposed an administrative fine of NT$800,000 on Deltamac (Taiwan) Co. Ltd in accordance with the fore part of Article 41 of the Fair Trade Law.

Appendix:
Deltamac (Taiwan) Co. Ltd.'s Uniform Invoice Number: 89398566