Dell Taiwan

Dell Taiwan

1225th Commissioners' Meeting (2015)

Case:

Dell Taiwan violated the Fair Trade Law for boycotting

Keyword(s):

Boycott, cut supply, agent, tender

Reference:

Fair Trade Commission Decision of April 29, 2015 (the 1225th Commissioners’ Meeting), Disposition Kung Ch’u Tzu No. 104033

Industry:

Computer Integration Systems Services (6202)

Relevant Law(s):

Subparagraph 1 of Article 19 of the Fair Trade Law (Subparagraph 1 of Article 20 of the current version)

Summary:

The FTC received complaints accusing Dell Taiwan (hereinafter referred to as the offender) of requesting its agents to cut supply on a tender-winning bidder and the boycotting practice was in violation of the Fair Trade Law.

Findings of the FTC after investigation:

The Environmental Protection Bureau of Tainan City put up a tender in 2013 to procure operating platform maintenance and integration services for its air quality database. After winning the contract, the Southern Taiwan Branch of Chunghwa Telecommunications Co., Ltd. (hereinafter referred to as Chunghwa Telecom Southern Branch) delegated a collaborating supplier to negotiate and purchase the SonicWALL server antivirus software. When the collaborating supplier was negotiating to purchase the Sonic WALL software between March and June 2013, Dell Taiwan on several occasions made agents and distributors for SonicWALL refuse to give quotations or sell the product to Chunghwa Telecom Southern Branch. In the end, the collaborating supplier was unable to acquire from domestic agents or distributors the SonicWALL software needed for Chunghwa Telecom Southern Branch to fulfill the contract.

Grounds for disposition:

(1) The SonicWALL software was a network security product developed by SonicWALL LLC which was a subsidiary of Dell Inc. SonicWALL signed its agency contracts with Weblink International Inc. and Zero One Technology Co., Ltd. for them to be in charge of marketing SonicWALL products in the country. Dell Taiwan did not sell SonicWALL products but had the responsibility to assist the agents to promote SonicWALL products while the agents were required to report their related operations to Dell Taiwan or apply to it for issuance of OEM certificates of authorization. In other words, Dell Taiwan had the power to decide whether the agents could purchase at special prices or acquire OEM certificates of authorization. Despite that SonicWALL products did not account for a large share of the domestic network and data security device market, it is a fact that they were specified in the procurement project of the Environmental Protection Bureau of Tainan City and the contract winning bidder could not replace the SonicWALL software with any information security product of a different brand without breaching the contract.
(2) After winning the contract from the Environmental Protection Bureau of Tainan City in March 2013, Chunghwa Telecom Southern Branch delegated a collaborating supplier to negotiate and purchase the SonicWALL product needed for the project. When finding out that the collaborating supplier was asking Weblink International Inc. for quotation, Dell Taiwan notified Weblink International Inc. “not to give any quotation or do anything about the request.” The collaborating supplier turned to Taifon Computer Co., Ltd. (hereinafter referred to as Taifon Computers) for quotation yet Dell Taiwan requested Taifon Computers to “leave the Tainan City Environmental Protection Bureau case alone.” As a result, the collaborating supplier went back to Weblink International Inc. but Dell Taiwan once again told the company that “if any company make price inquiries or place orders in relation to the procurement project of the Environmental Protection Bureau of Tainan City, do not supply any product.”
(3) The boycotting conduct of Dell Taiwan during March to August 2013 made the collaborating supplier unable to purchase SonicWALL products in the country. In the end, it bought the software overseas. However, Dell Taiwan changed the expire date of authorization and rendered the product unusable. Consequently, Chunghwa Telecom Southern Branch could not complete the acceptance inspection as scheduled in this case and the conduct of Dell Taiwan also deterred other suppliers from taking part in bidding for similar projects and created a chilling effect. The FTC concluded that the aforementioned conduct of Taiwan Dell had already met the description of “causing another enterprise to discontinue supply, purchase or other business transactions with a particular enterprise for the purpose of injuring such particular enterprise” set forth in Subparagraph 1 of Article 19 of the Fair Trade Law at the time and it was likely to lead to competition restrictions. Therefore, the FTC imposed an administrative fine of NT$2 million on Dell Taiwan.

Appendix:

Dell B.V., Taiwan Branch (the Netherlands)'s Uniform Invoice Number: 27247049

Summarized by Yang, Chung-Lin Supervised by Liao, Hsien-Chou

(1)	The SonicWALL software was a network security product developed by SonicWALL LLC which was a subsidiary of Dell Inc. SonicWALL signed its agency contracts with Weblink International Inc. and Zero One Technology Co., Ltd. for them to be in charge of marketing SonicWALL products in the country. Dell Taiwan did not sell SonicWALL products but had the responsibility to assist the agents to promote SonicWALL products while the agents were required to report their related operations to Dell Taiwan or apply to it for issuance of OEM certificates of authorization. In other words, Dell Taiwan had the power to decide whether the agents could purchase at special prices or acquire OEM certificates of authorization. Despite that SonicWALL products did not account for a large share of the domestic network and data security device market, it is a fact that they were specified in the procurement project of the Environmental Protection Bureau of Tainan City and the contract winning bidder could not replace the SonicWALL software with any information security product of a different brand without breaching the contract.
(2)	After winning the contract from the Environmental Protection Bureau of Tainan City in March 2013, Chunghwa Telecom Southern Branch delegated a collaborating supplier to negotiate and purchase the SonicWALL product needed for the project. When finding out that the collaborating supplier was asking Weblink International Inc. for quotation, Dell Taiwan notified Weblink International Inc. “not to give any quotation or do anything about the request.” The collaborating supplier turned to Taifon Computer Co., Ltd. (hereinafter referred to as Taifon Computers) for quotation yet Dell Taiwan requested Taifon Computers to “leave the Tainan City Environmental Protection Bureau case alone.” As a result, the collaborating supplier went back to Weblink International Inc. but Dell Taiwan once again told the company that “if any company make price inquiries or place orders in relation to the procurement project of the Environmental Protection Bureau of Tainan City, do not supply any product.”
(3)	The boycotting conduct of Dell Taiwan during March to August 2013 made the collaborating supplier unable to purchase SonicWALL products in the country. In the end, it bought the software overseas. However, Dell Taiwan changed the expire date of authorization and rendered the product unusable. Consequently, Chunghwa Telecom Southern Branch could not complete the acceptance inspection as scheduled in this case and the conduct of Dell Taiwan also deterred other suppliers from taking part in bidding for similar projects and created a chilling effect. The FTC concluded that the aforementioned conduct of Taiwan Dell had already met the description of “causing another enterprise to discontinue supply, purchase or other business transactions with a particular enterprise for the purpose of injuring such particular enterprise” set forth in Subparagraph 1 of Article 19 of the Fair Trade Law at the time and it was likely to lead to competition restrictions. Therefore, the FTC imposed an administrative fine of NT$2 million on Dell Taiwan.