Run Far Outdoors

Case:

Key Word(s):

Outdoor equipment, product distribution contract, suggested price

Reference:

Fair Trade Commission Decision of May 29, 2013 (the 1125th Commissioners' Meeting); Disposition Kung Ch'u Tzu No. 102074

Industry:

Wholesale of Sports Goods (4582)

Relevant Law(s):

Article 18 of the Fair Trade Law

Summary:

1. Run Far Outdoors (hereinafter referred to as RFO) and 100 Mountain Sports Equipment Co., ltd. (hereinafter referred to as 100 Mountain) signed on May 13, 2011 a "product distribution contract" which made 100 Mountain an agent for RFO's "Snow Peak" series of outdoor equipment and accessories. However, it was set forth in the contract and its appendices that the retail prices of 100 Mountain could not be lower than 90% of the minimum prices set by RFO; otherwise, RFO, if the conduct was not corrected, had the right to terminate the contract and stop supplying 100 Mountain with its products. The said conduct of RFO was in violation of Article 18 of the Fair Trade Law.
2. Findings of the FTC after investigation:
   

   (1)

   RFO marketed the Japanese "Snow Peak" products through outdoor and sports equipment stores around the island. To implement its pricing policy for the said products, RFO signed with every distributor a "Product Distribution Contract" to which a number of appendices were attached and it was clearly specified that the distributor could not sell the products at lower than 90% of the retail prices set by RFO. If any distributor violated the said clause and refused to correct its violation, RFO had the right to terminate the distribution contract and stop supplying the distributor with the said products.

   (2)

   In early August 2012, 100 Mountain gave a 20% discount on the "Snow Peak" products, apparently lower than the minimum retail prices stipulated in the "Product Distribution Contract" and its appendices. RFO therefore issued to every distributor on August 14, 2012 a written notice to declare that it had terminated the distributorship of 100 Mountain.

3. Grounds for disposition:
   

   (1)

   The retailers of the "Snow Peak" outdoor equipment supplied by RFO were distributors whose profit came from the difference between their purchasing prices and selling prices. They were not agents who received commissions for what they sold. Therefore, after supplying the "Snow Peak" outdoor equipment, RFO had to allow 100 Mountain complete freedoms to determine its own prices.

   (2)

   However, RFO stipulated in the "Product Distribution Contract" and its appendices that the distributor could not sell the "Snow Peak" outdoor equipment for less than 90% of the prices it had decided; otherwise, RFO, if a distributor violated the said clause and refused to correct its violation, had the right to stop supplying the products to the distributor and deprive its distributorship. This is why soon after 100 Mountain gave a 20% discount on the "Snow Peak" outdoor equipment in early August 2012, RFO immediately notified in writing all the distributors in the country that it had terminated the distributorship of 100 Mountain and also stopped supplying 100 Mountain with its products. It was clear that RFO had restricted the resale prices of 100 Mountain for the "Snow Peak" outdoor equipment and the conduct had deprived a distributor of its freedom to decide its own prices. In other words, such a distributor was unable to set its own prices in accordance with the level of market competition it faced and its own management strategy. The result would lessen the intra-brand price competition among different retailers and it was in violation of Article 18 of the Fair Trade Law.

Appendix:
Run Far Outdoors' Uniform Invoice Number: 80654852

Summarized by Wu, Hsin-Te; Supervised by Yang, Chia-Hui