Global Digital Media and Two Other Channel Agents

1302nd Commissioners' Meeting (2016)

Case:

Global Digital Media and two other channel agents violated the Fair Trade Law for engaging in discriminative treatment when licensing their clients

Keyword(s):

Channel agent, channel licensing, minimum contracted subscribers
Reference:
Fair Trade Commission Decision of October 19, 2016 (the 1302nd Commissioners' Meeting; Dispositions Kung Ch'u Tzu No.105118, No.105119 and No.105120

Industry:

Leasing of Intellectual Property and Similar Products, Except Copyrighted Works (7740)

Relevant Law(s):

Article 20(ii) of the Fair Trade Law

Summary:

  1. The FTC launched an investigation to clarify whether channel agents Global Digital Media Co. Ltd. (hereinafter referred to as Global Digital Media), Jia Xun Multimedia Co., Ltd. (hereinafter referred to as Jia Xun Multimedia) and Kbro Co., Ltd. (hereinafter referred to as Kbro) had violated the Fair Trade Law by obstructing new and cross-district cable Television operators from participating in market competition when licensing them to use channels the three companies were agents for in 2016.
  2. Findings of the FTC after investigation:
    During the investigation, the FTC discovered that when licensing DigiDom Cable TV Co., Ltd. (hereinafter referred to as DigiDom), Dafeng Cable TV Co., Ltd. (hereinafter referred to as Dafeng), New Kaohsiung Cable TV Co., Ltd. (hereinafter referred to New Kaohsiung), TaipeiNet Cable TV Co., Ltd. (hereinafter referred to as TaipeiNet) and Sky Digital Convergence Service Co., Ld. (hereinafter referred to as Sky Digital), all starting operation in 2015, Global Digital Media, Jia Xun Multimedia and Kbro all adopted the policy having subscribers achieving 15% of the total households of the corresponding administrative district as the minimum guarantee (MG), but the investigation revealed that the actual MG for the aforesaid operators was several times of the number of subscribers of each system operator. Meanwhile, the channel licensing contracts Global Digital Media, Jia Xun Multimedia and Kbro signed with existing system operators showed that the MG applied was only a certain percentage of the actual number of subscribers. In other words, the difference ended up causing the new operators DigiDom, Dafeng, New Kaohsiung, TaipeiNet and Sky Digital to pay much higher licensing fees than existing system operators and making it harder for them to compete on the market.
  3. Grounds for disposition:
    1. The FTC assessed the supply-demand condition on the relevant market, cost differences, transaction amounts and credit risks and concluded the discriminative treatment adopted by Global Digital Media, Jia Xun Multimedia and Kbro was not justifiable. Since most cable TV channels were licenses by channel agents for system operators to broadcast to consumers, Global Digital Media, Jia Xun Multimedia and Kbro apparently had rather considerable market power in the channel agent market. In addition, the channels they represented included some of the mainstream channels that were extremely popular programs. System operators who were unable to obtain licensing for such channels would find it difficult to attract consumers to enter into the subscription contract with them. The three channel agents took advantage of the need of new and cross-district cable TV system operators and made it hard for them to use better prices, quality and service to attract consumers. It became a competition barrier for new and cross-district system operators. In fact, they might even end up getting pushed out of the market. The conduct had seriously weakened competition in the cable TV service market in violation of Subparagraph 2 of Article 20 of the Fair Trade Law.
    2. After evaluating the motive behind the illegal conduct of Global Digital Media, Jia Xun Multimedia and Kbro, the extent of damage incurred, the seriousness of the violation, as well as the business scales and attitudes of the offenders after the violation, the FTC cited Paragraph 1 of Article 40 of the Fair Trade Law and ordered Global Digital Media, Jia Xun Multimedia and Kbro to correct the unlawful act within one month after receiving the disposition while also imposed on them administrative fines of NT$40 million, 45 million and 41 million respectively. The fines totaled NT$126 million.

Appendix:
Global Digital Media Co. Ltd.� Uniform Invoice Number: 27977066
Kbro Co., Ltd.� Uniform Invoice Number: 80173221
Jia Xun Multimedia Co., Ltd.� Uniform Invoice Number: 12385992

Summarized by: Shen, Li-Wei; Supervised by: Kuo, An-Chi