Wacom Taiwan

1382nd Commissioners' Meeting (2018)

Case:

Wacom Taiwan violated the Fair Trade Law by restricting the resale prices for Wacom drawing tablets

Keyword(s):

Digital drawing tablet, suggested price

Reference:

Fair Trade Commission Decision of May 2, 2018 (the 1382nd Commissioners' Meeting); Disposition Kung Ch'u Tzu No. 107023

Industry:

Manufacture of Other Computer Peripheral Equipment (2719)

Relevant Law(s):

Article 19(1) of the Fair Trade Law

Summary:

1. The informer sold drawing hardware and software from Wacom, including digital drawing tablets and drawing pads. The Wacom digital drawing equipment products sold in the domestic market were supplied by Wacom Taiwan to two agents who resold to retailers who then sold to consumers. Wacom Taiwan did not particularly specify that the retailers had to sell the products at prices set by the company. However, if retailers sold the products at prices too low, It is likely that Wacom Taiwan would warn them not to do so. In January 2013, Wacom Taiwan once asked one of the agents to request the informer not to lower the prices of the company's products. In August 2016, one of the agents sent an email to warn the informer not to sell Wacom products at low prices and then disconnected its supply to the informer. According to the informer, Wacom Taiwan sent the warnings because it received complaints from other retailers about the price competition the informer initiated. In order to appease other retailers, Wacom Taiwan decided to warn the informer against selling its products at low prices and the conduct was in violation of Paragraph 1 of Article 19 of the Fair Trade Law.
2. Findings of the FTC after investigation:
   Wacom Taiwan admitted that it had indeed instructed the agent to stop supplying the informer, as stated above, after receiving complaints from other retailers pointing out that the informer's selling Wacom digital drawing tablets at low prices online had resulted in schools suppressing their purchase prices for Wacom digital tablets. Wacom Taiwan contested that the company prohibited online retailers from selling its products at low prices because it had to maintain the profit of retailers of educational products in order to encourage them to provide presales services. The FTC's investigation, however, indicated that online retailers and retailers of educational products belonged to two different markets. Low price strategies adopted by online retailers would not take away the customers of retailers of educational products. Therefore, free riding was not a concern in this case. For the same reason, restricting online retailers from price competition could not increase the incentives for retailers of educational products to provide presales services. In other words, the reason given by Wacom Taiwan was invalid. By imposing the resale price restriction, Wacom had violated Paragraph 1 of Article 19 of the Fair Trade Law.
3. Grounds for disposition:
   Wacom Taiwan restricted its retailers' prices for the company's Wacom digital drawing tablets but was unable to justify how its adoption of this practice could promote market competition. As a result, its conduct was in violation of Paragraph 1 of Article 19 of the Fair Trade Law. However, Wacom Taiwan had only interfered with the freedom of the retailer who sold the company's products at lower prices but had not set any fixed retail prices, and the company had not prohibited all retailers from engaging in price competition. Therefore, after assessing the duration of the unlawful act, the company's revenue in 2016, the fact that it was the first time the company violated the Fair Trade Law, and the company's cooperativeness during the investigation, the FTC cited the first section of Paragraph 1 of Article 40 of the Fair Trade Law, imposed an administrative fine of NT$300,000, and at the same time ordered it to immediately cease the unlawful act.