Timer Technology Co., Ltd

Case:

Key Word(s):

Cell phone leather cases, parallel import, suggested price list

Reference:

Fair Trade Commission Decision of June 5, 2013 (the 1126th Commissioners' Meeting); Disposition Kung Ch'u Tzu No. 102091

Industry:

Other Leather, Fur Products Manufacturing (1309)

Relevant Law(s):

Article 18 of the Fair Trade Law

Summary:

1. The FTC received complaints stating that Timer Technology Co., Ltd. (hereinafter referred to as Timer Co.) had notified all its retailers on August 12, 2011 to raise the prices of the "HOCO" cell phone leather cases from NT$300 to between NT$1,000 and NT$1,300. It also threatened to distribute infringement letters to online auction platform operators if any retailer failed to comply with its notification. As a consequence, the prices for the products were made consistent island wide.
2. Findings of the FTC after investigation:
   

   (1)

   Timer Co. became the sole agent for the "HOCO" cell phone leather cases after obtaining the right to use the "HOCO" trademark in Taiwan from Hoco Technology Co., Ltd. in Hong Kong on October 16, 2011. The company marketed its products through 3 retail outlets it directly owned, online shops, and other retail channels. Except for one contracted distributor, all transactions between Timer Co. and the distributors or online auction operators were outright sales.

   (2)

   After screening the information obtained from auction websites and physical outlets as well as interviewing those who sold the "HOCO" cell phone leather cases, the FTC found out that there were also parallel imports of the said cell phone leather cases available in the market. Since Timer Co. also sold the products on the Internet, online action platform operators would set their prices by referring to the prices of Timer Co. But, there were still price differences. However, in order to prevent distributors from price undercutting to promote their sales, Timer Co. specified in its distribution contract that the distributor had to sell the products according to the suggested retail prices. In addition, the penalty clause in the distribution contact stipulated that those who fail to comply with the suggested retail prices shall be punished. As for the threat to distribute infringement letters to online auction platform operators for suspected counterfeits, it was a justifiable action of exercising rights as set forth in the Trademark Act.

3. Grounds for disposition:
   

   (1)

   It was stipulated in the said distribution contract that the distributor had to sell the products according to the suggested retail prices set by Timer Co. If auditors from Timer Co. discovered that a distributor was giving discounts or engaged in price undercutting without obtaining the consent of the company in advance, such a distributor had to accept, with any exception, the penalties agreed upon by both parties. For those who are found in violation for the first time, the fine would be 10 times of the suggested retail prices of the products in question multiplied by the quantity of the most recent order. For those who are found in violation for the second time, the fine would be 20 times, plus suspension of supply for 3 days. For those who are found in violation for the third time, the fine would be 20 times and the distributorship would also be terminated.

   (2)

   Since the transaction were outright purchases, the distributors got the ownership of the products after payment made and became responsible for risks associated with the products, sales, and finance. The contract that restricted the resale prices of distributors and the penalty clause of the distribution contract had deprived the freedom of the distributors to make their own price decisions. The distributors were thus unable to set prices in accordance with the level of market competition they faced and their own cost structure. The conduct was in violation of Article 18 of the Fair Trade Law. The FTC therefore ordered the company to cease its unlawful act and also imposed on it an administration fine of NT$50,000.

Appendix:
Timer Technology Co., Ltd.'s Uniform Invoice Number: 24206988

Summarized by Chien, Hao-Yue; Supervised by Yang, Chia-Hui