i-Geeker Technology Co., Ltd.

Case:

i-Geeker Technology was complained for its violation of the Fair Trade Law by restricting distributors’ business activities

Key Word(s):

Leather case, vertical restriction, market power

Reference:

Fair Trade Commission Decision of December 10, 2014 (the 1205th Commissioners' Meeting)

Industry:

Wholesale of Other Specialized Wholesale Not Elsewhere Classified (4699)

Relevant Law(s):

Article 19(vi) of the Fair Trade Law

Summary:

1. i-Geeker Technology Co., Ltd. (hereinafter referred to as i-Geeker Technology) was the general agent for the ICARER leather cases. On Dec. 3, 2013, i-Geeker Technology sent an email to all of its first-level distributors requesting them to inform online sellers of the regulation that sellers' actual purchases of the ICARER leather cases were required before sales advertisements could be posted on the Internet. i-Geeker even directly contacted online seller Ai Ke Li Enterprise Co., who failed to comply with the aforesaid regulation, replaced the first-level distributor that supplied it the products, and had its online sales announcement removed. The conduct of i-Geeker was in violation of the Fair Trade Law.
2. Findings of the FTC after investigation:
   i-Geeker admitted that its trading relations with the first-level distributors were outright sales. The second-level distributors (such as online sellers) were actually the counterparts of the first-level distributors and did not have direct business relations with i-Geeker. Because it did not want to have distributors at various levels to avoid the risk of stagnant sales by collecting payments from consumers in advance with no products in stock that results in over-sales and inability to deliver or to deliver flawed products, and in turn gave rise to consumer disputes, i-Geeker therefore announced its adoption of the measure of "controlling the numbers of new products advertised online," including requiring second-level distributors who had no direct business relations with the company to have in stock at least one leather case of each color before they could advertise online. At the same time, i-Geeker also removed the online sales announcement of second-level distributors who failed to comply with the regulation and at the same time replaced the first-level distributors that supplied them the products.
3. Grounds for disposition
   

   (1)

   i-Geeker sent the email to inform its first-level distributors who had direct business relations with the company of its decision to "control the numbers of new products advertised online" and at the same time request them to apply the controlling measure on second-level distributors to whom they supplied. According to i-Geeker's estimation, the company accounted for only 8.8% of the share of the genuine leather case market. If the synthetic leather case market was also included, the company's market share would be even smaller. Furthermore, there were close to ten brands of genuine leather cases and numerous synthetic leather cases available in the market. Downstream businesses could easily switch to new trading counterparts and did not have to count on i-Geeker as their sole source of products. For this reason, it was difficult to conclude that the vertical restriction i-Geeker imposed on its first-level distributors could restrain market competition in violation of Article 19(vi) of the Fair Trade Law.

   (2)

   i-Geeker replaced the first-level distributors supplying to second-level distributors who did not comply with the company's regulation. This vertical restriction was imposed through first-level distributors on online sellers who did not have director business relations with the company. However, it was similar to vertical restrictions imposed on first-level distributors and therefore could be interpreted in a broader sense to include these online sellers as the counterparts specified in Article 19(vi) of the Fair Trade Law to extend the types of conduct subject to the regulation therein. Under such circumstances, it was difficult to conclude that the vertical restriction imposed by i-Geeker on Ai Ke Li Enterprise Co. would give rise to any competition restraint. Therefore, i-Geeker's conduct did not violate any law.

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