Koninklijke Philips N.V.

1219th Commissioners' Meeting (2015)

Case:

Koninklijke Philips N.V. in violation of the Fair Trade Law

Keyword(s):

CD-R disc, joint licensing

Reference:

Fair Trade Commission Decision of March 25, 2015 (the 1219th Commissioners' Meeting), Disposition Kung Ch’u Tzu No. 104027

Industry:

Data Storage Media Units Manufacturing (2740)

Relevant Law(s):

Article 10 of the Fair Trade Law (Article 9 of the current version)

Summary:

  1. In 1999 a domestic CD-R manufacturer filed a complaint stating that the CD patent licensing practices of Koninklijke Philips N.V. (hereinafter referred to as Philips), Sony Corporation (hereinafter referred to as Sony) and Japan-based Taiyo Yuden Co., Ltd. (hereinafter referred to as Taiyo Yuden) were in violation of the Fair Trade Law. In 2001, the FTC cited Subparagraph 2 of Article 10 and Article 14 of the Fair Trade Law at the time and imposed administrative fines on the above three companies. The companies found the sanctions unacceptable and appealed. The Cabinet revoked the original FTC sanctions and instructed the FTC to make other appropriate sanctions. After further investigation and analysis, the FTC made a new decision and imposed different administrative fines on the said businesses in 2002. The three companies still did not want to accept the sanctions but their appeals were overruled. Subsequently, they filed administrative appeals with Taipei High Administrative Court which revoked the above sanctions and requested the FTC to review the case further and give out other legally sound sanctions. The FTC disagreed with the ruling but its appeal was rejected. The FTC then asked for a retrial but the request was also overruled. In 2009, the FTC reexamined the case, cited Subparagraphs 2 and 4 of Article 10 of the Fair Trade Law when the illegal conduct had taken place, and imposed administrative fines on the three companies. They refused to accept the decision but their appeals were rejected. An administrative appeal was filed once more but it was overruled by the Intellectual Property Court (2011 Hsing-Kung-Su-Tzu Administrative Decisions No. 4 and 5). Sony and Taiyo Yuden did not appeal further and Philips, however, would not accept the decision and appealed. The decision of the Supreme Administrative Court was: “The original ruling is revoked. Besides the part that is finalized, the decision on the appeal and the original sanctions are revoked.” As Sony and Taiyo Yuden had not appealed further, the above Intellectual Property Court’s decision was final for the two companies. With Philips, the FTC was to act according to the aforesaid decision and come up with another legally sound sanction. The FTC found the verdict unacceptable but its request for a retrial was denied. In 2014, the FTC complied with the said verdict and re-determined the fine amount based on Philips’ violation of only Subparagraph 2 of Article 10 of the Fair Trade Law at the time of violation (investigation was terminated since the evidence for the violation against Subparagraph 4 of Article 10 of the Fair Trade Law at the time the illegal conduct had taken place was no longer available and the market structure had changed too). Philips appealed. The Cabinet revoked the sanction and instructed the FTC to reassess the case and make a more proper decision.

  2. Findings of the FTC after investigation: The FTC sent Philips a written request for a defense statement and also asked the other two parties in writing several times to provide statements and information to the FTC. The FTC’s staff members also visited and interviewed a number of concerned suppliers, including domestic CD-R makers and Asia Pacific Technology and Intellectual Property Services Inc. The professional opinions from the Electronic and Optoelectronic System Research Laboratories of Industrial Technology Research Institute were solicited a few times as well. In the end, the FTC acted according to the decision of the Cabinet and decided a sanction that was legally sound.

  3. Grounds for disposition:
    (1)Philips, Sony and Taiyo Yuden enjoyed dominance in the CD-R technology market due to the joint licensing practice they adopted and therefore were able to exclude other enterprises from competing with them. The condition met the description of “monopolistic enterprise” in Article 5 of the Fair Trade Law at the time of violation and this had been affirmed in the decisions of the Cabinet, High Administrative Court, Supreme Administrative Court and Intellectual Property Court.
    (2)In principle, businesses should have the liberty to determine their product or service prices in accordance with the competition they face on the market and their cost structures. However, after adopting the above joint licensing practice and attaining monopolistic status in the CD technology market, Philips, Sony and Taiyo Yuden refused to given their licensees any opportunity to negotiate despite that the global CD-R market had grown unexpectedly large in scale. They continued to adhere to the original formulas for calculating the license fees. The conduct was in violation of the regulation against improper price manipulation set forth in Subparagraph 2 of Article 10 of the Fair Trade Law at the time. Therefore, the FTC imposed an administrative fine of NT$1.8 million on Philips.


Summarized by Chen, Shu-Hua; Supervised by Wu, Lieh-Ling □