Easycard Corporation

Case:

Key Words:

electronic ticket, EasyCard stored value card, bundled sales

Reference:

Fair Trade Commission Decision of May 27, 2011 (the 1029th Commissioners' Meeting), Letter Kung Yi Tzu No. 1001260897

Industry:

Other Unclassified Financial Agent (6499)

Relevant Laws:

Article 10(ii) , 19(ii) and 19 (vi) of the Fair Trade Law

Summary:

1. This case concerns reports that the Easycard Corporation (hereinafter referred to as"Easycard") has violated the terms and conditions of the Fair Trade Law through its conduct in the electronic ticketing market: If Easycard contracts with one particular convenience store retailer among the four major ones in Taiwan, thereby excluding the others from joining as partnered agencies and interfering with opportunities to compete, such conduct would be considered in violation of Article 19(ii) of the Fair Trade Law. Further, Easycard compelled parties interested in entering partnership agreements to purchase terminal equipment under the justification of system integration and interface specifications, in violation of Article 19(vi) of the Fair Trade Law. Moreover, in addition to payment of licensing fees, financial institutions issuing Easycard stored value cards were required to pay issuing fees. The reasonableness of such fees is deemed in accordance with the terms of Article 10(ii) of the Fair Trade Law.
2. Background:
   (1) Easycards issued by the Easycard Corporation have not established a share of fifty percent in the small sum consumer payment implements market; however, Easycard has established a fifty-percent share in the transportation payment implements market, and accordingly must comply with the parameters of a monopoly enterprise as defined by Article 5-1(1)(i) of the Fair Trade Law. In addition, the FTC's investigation found that as defined by the terms of the Mass Rapid Transit Act regarding monopolistic enterprises, the scope of the cardholder base for the integrated Greater Taipei MRT and city bus public transportation systems constitutes a competitive advantage over other businesses, and that a high degree of reliance exists among consumers using Easycards for taking public transport. Moreover, the network effect engendered by the bilateral market has raised the conversion costs for trading counterparts. Consequently, the Easycard Corporation commands a dominant position in the transportation payment implement market, and has the capacity to exclude competition, and therefore constitutes a"monopolistic enterprise" as defined by Article 5 of the Fair Trade Law.
   (2) Additional investigation showed that the Easycard Corporation's cooperative arrangements authorizing banks to issue Easycard stored value cards were undertaken via open bidding and open solicitation of vendors; any bank that finds the Easycard
   Corporation's authorization fees unreasonable can choose to cooperate with other parties or issue its own electronic tickets. Agencies contracting with Easycard include mass rapid transit operators, parking lot operators, taxi fleets, and participating small-sum consumer retailers, and that such aspects of cooperation with contracted agencies such as operational workflow, rights and privileges, and fee payments, were explicitly stated on the Internet and in written contracts. It was further found that the Easycard Corporation does not manufacture Easycard system card readers and terminal equipment itself, and that contracted agencies obtained terminal equipment rights through autonomous consultation and purchase or lease, purchased by the Easycard Corporation, leased from the Easycard Corporation, and furnished by the Easycard Corporation.
3. Findings of the FTC after investigation:
   (1) Based on the evidence currently available, the Easycard Corporation has not engaged in such unfair conduct as unfair pricing, discriminatory treatment, or tie-ins via a monopolistic position in the transportation payment implements market in violation of the Fair Trade Law.
   (2) The arrangement between the Easycard Corporation and banks issuing Easycard stored value cards was made via open bidding and open solicitation of vendors, where it proposed conditions to the banks regarding such fees and payments as security deposits, royalties, and card issuing royalties for fulfilling the terms of the agreement, and where banks interested in cooperation willingly submitted applications and entered into contracts. Further, whether or not the Easycard Corporation cooperated with banks to jointly issue Easycard stored value cards is a matter of operational freedom, and the banks reserve the right not to issue joint stored value cards with Easycard, instead choosing to cooperate with international credit card or financial firms, or issue their own electronic tickets. Consequently, it is difficult to determine that the Easycard Corporation's determinations regarding licensing fees for banks issuing Easycard stored value cards on the basis of its high share of the mass transit payment mechanism market.
   (3) The contracted agencies that the Easycard Corporation selected for cooperation in accordance with the terms of the Provisions Governing Electronic Ticketing Issuance and Management currently include mass transit operators, parking lot operators, taxi cab fleets, and petty consumption retailers, and not exclusively contracted with just one of Taiwan's four major convenience store retailers. Further, in reaching agreements with small sum consumption retailers and assessing related fees with its own needs in mind, each party must evaluate its own situation before determining whether or not to cooperate with Easycard. Therefore it is difficult determine whether the Easycard Corporation had reasonable justification for discriminatory conduct toward other enterprises by not engaging in contractual agreements with participating enterprises.
   In accordance with the terms of the Provisions Governing Electronic Ticketing Issuance and Management, the rights and responsibilities of an electronic ticket issuing firm and a contracted agency must be set forth in a cooperative agreement detailing such items as the installation of electronic ticketing automatic debiting equipment and cost sharing. In addition, the Easycard Corporation itself does not manufacture card reading machines and terminal equipment, hence Easycard electronic ticketing services and system terminal equipment are separable goods or services, and a contracted agency may determine on its own whether or not to purchase Easycard system terminal equipment upon consideration of its own needs.
   Therefore, it is difficult to deem that the Easycard Corporation engaged in transactions via improper restriction of the conditions under which its counterparties could conduct business activities

Appendix:
Easycard Corporation's Uniform Invoice Number: 70765909

Summarized by Chou, Huang-Chun; Supervised by Liao, Hsien-Chou