Fair Trade Law Q&A - General Provisions

1. What practices are subject to the regulation of the Fair Trade Law ?

A1:

1. Monopolistic enterprises may not adopt unfair means to directly or indirectly prevent other enterprises from competing, improperly set, maintain or change prices of products or services, make trading counterparts give preferential treatment without justification, or abuse their market status.
2. When the scale of an intended business merger will achieve a certain level, it must be filed with the competent authority in advance. Mergers will be forbidden and sanctions may be imposed if they should be filed in advance but the merging parties fail to do so, if they are conducted despite prohibition by the competent authority or if the merging parties fail to implement the undertakings attached by the competent authority as part of its merger decisions.
3. Concerted actions are prohibited unless they meet the conditions described in the proviso set forth in Article 15 of the Fair Trade Law and are beneficial to the overall economy and public interest while the competent authority has also given permission.
4. Unless there are justifiable reasons, businesses may not restrict the resale prices determine by their trading counterparts for products they supply.
5. The following acts are prohibited when they are deemed likely to restrain competition:
   1. Causing another business to discontinue supply, purchases or transactions with a certain enterprise for the purpose of injuring such an enterprise
   2. Treating another enterprise discriminatively without justification
   3. Preventing competitors from participating or engaging in competition by inducement with low price or other improper means
   4. Creating business relations with the trading counterparts of competitors by coercion, inducement or other improper means
   5. Causing another enterprise to refrain from competing in price, or to take part in a merger or concerted action by coercion, inducement with interest or other improper means
   6. Imposing improper restrictions on its trading counterparts’ business activities as a business transaction condition
6. Businesses are forbidden to make or use false, untrue or misleading representations or symbols on their products or in advertisements.
7. Businesses are forbidden to make or disseminate any false statement that is capable of damaging the business reputation of another for the purpose of competition.
8. Businesses are forbidden to have any deceptive or obviously unfair conduct that is able to affect trading order.

2. What changes have been made in the amendments to the Fair Trade Law conducted over the years?

A2:

1. The first amendment

   The"Draft Partial Amendment to the Fair Trade Law"was passed by the Legislative Yuan on its third reading on Jan. 15, 1999 and was promulgated by the president on Feb. 3 of the same year to take effect on Feb. 5. A total of 20 articles were added/amended and the key revisions are as follows:

   1. The regulations regarding the announcement of monopolistic businesses and businesses accounting for one fifth of the relevant market shares (Paragraph 2 of Article 10 and Paragraph 2 of Article 11 of the original version) were deleted.
   2. Administrative fines could be imposed for illegal practices whereas the maximum fines were raised and minimum fines were specified (Articles 40 and 41).
   3. The principle of"application of administrative measures before judicial measures"was adopted for illegal practices and the fines were increased (Articles 35, 36 and 37).
   4. The regulation of multi-level marketing was tightened and illegal practices were to be given appropriate sanctions (Articles 23, 23-1, 23-2, 23-3, 23-4 and 42).
   5. The status of the Fair Trade Law as a basic economic law was confirmed, with competition policy and industrial policy both being taken into account (Article 46).
   6. Exemption of daily commodities from the regulation against restrictions on resale prices was deleted (proviso in Paragraph 1 and Paragraph 2 of Article 18).
2. The second amendment
   The amendment to Article 9 was promulgated on Apr. 26, 2000. The regulation with regard to the competent authority at the provincial level in Article 9 was deleted to accommodate the Provisional Statute for the Reorganization of Provincial Government and the Local Government Act.
3. The third amendment
   In line with the Administrative Procedure Act to be implemented on Jan. 1, 2001, the Fair Trade Commission drew up the"Draft Partial Amendment to the Fair Trade Law"and presented it to the Executive Yuan for approval before forwarding it to be reviewed by the Legislative Yuan. On Aug. 2, 2001, the Executive Yuan completed the review and turned it over to the Legislative Yuan. However, seeing that domestic businesses were facing competition pressure resulting from economic globalization in the 21st century and corporate acquisitions were becoming a tendency in order to cope with the competitive edge of multinational corporations and the biological structure in the domestic economic environment, the Fair Trade Commission therefore came up with the"Second Draft Partial Amendment to the Fair Trade Law"in 2001 as a response to the industrial structure adjustment as well as the demand in the domestic economic environment at the time by taking into consideration the protection of market competition mechanisms, the conclusion achieved in the Industrial Group meeting of the Economic Development Advisory Committee was that the procedure for the review of corporate acquisition applications had to be simplified, obstacles had to be removed and proper incentives had to be given, as well as stipulations in the competition laws of other countries regarding merger regulation examined. On Aug. 31, 2001, the second draft amendment was presented to the Executive Yuan, which gave its approval and forwarded the draft on Oct. 17 in the same year to be reviewed by the Legislative Yuan. After reviewing both drafts, the Legislative Yuan passed the amendment on its third reading on Jan. 15, 2002 and the president promulgated it on Feb. 6 in the same year to take effect on Feb. 8. Fifteen articles were added/amended and the key revisions are as follows:
   1. Control of business mergers was changed from"filing applications for approval"to"filing merger notifications for permission unless there is any objection."In addition, the regulation on the announcement of the singular business sales threshold for merger filing was revised to become that where the Fair Trade Commission could separately announce the thresholds for financial institutions and non-financial businesses depending on the situation. In addition, if the Fair Trade Commission did not put forward any objection within 30 days after a merger notification was filed, the merger could be conducted (Article 11).
   2. It was stipulated that business mergers unlikely to weaken market competition did not have to be filed with the Fair Trade Commission (Article 11-1).
   3. It was added that the central competent authority could attach conditions to its approvals for business mergers and the consequences of failures to comply with the conditions were also specified (Article 12).
   4. A number of regulations concerning interests of the public in secondary laws were included in the Fair Trade Law (Articles 501, 7, 8 and 42-1).
   5. Regulations regarding the processing duration, types of conditions to be attached and repeal of the Fair Trade Commission's approval for concerted actions under exceptional circumstances were added. At the same time, the range of authorization, the principle for allowing concerned parties to access related information or files and the legal basis of such authorization were also specified in the Multi-level Marketing Supervision Act (Articles 14, 15, 16, 17, 23-4 and 27-1).
4. The fourth amendment

   The amendment to Article 21 was promulgated by the president on Jun. 9, 2010. The amendment was proposed by Legislator Zhao Li-yun and others. It was added that endorsers for false advertisements would be jointly and severally liable for compensation and the definition of advertisement endorsers was also specified.

5. The fifth amendment

   The addition of Article 35-1 and amendments to Articles 21 and 41 were promulgated by the president on Nov. 23, 2011. The addition and amendments were proposed by Legislators Ding Shou-zhong, Zhao Li-yun and Luo Ming-cai. The main contents included the provisions on leniency policy, limitation of the joint and several liability of non-celebrity advertisement endorsers and increase of maximum fines for certain illegal practices.

6. The sixth amendment

   In 2003, the Fair Trade Commission conducted a complete review and revision of the Fair Trade Law. Opinions from the industrial, government and academic sectors were solicited. After repeated inspections and discussions, the Fair Trade Commission worked out a draft amendment and presented it to the Executive Yuan in 2012. It was approved and turned over to be reviewed by the Legislative Yuan. The proposals put forth by Legislator Huang Zhao-shun, Ding Shou-zhong, Su, Chen-Ching and Pan Meng-an were consolidated and the Legislative Yuan eventually passed the draft amendment on its third reading on Jan. 22, 2015 and the full text of the amended provisions was promulgated by the president on Feb. 4 in the same year. The changes were made to accommodate the organizational restructuring of the Executive Yuan. The articles were rearranged, the descriptions of different types of illegal conduct were revised, the power of the competent authority was reinforced and the effects of administrative sanctions were increased.

   The key contents of the amendment included:

   1. Revision of the definition of"enterprise"(Article 2)
   2. Revision of the title of the Fair Trade Commission and deletion of regulations regarding local competent authorities (Article 6 and others)
   3. Revision of the criteria for recognition of monopolistic businesses (Article 8)
   4. Revision of the merger regulations (Articles 10 to 12)
   5. Revision of the concerted action regulations (Articles 14 to 18)
   6. Addition of the regulation against restrictions on resale prices and the corresponding proviso that the regulation was also applicable mutatis mutandis to services (Article 19)
   7. Revision of the regulations against unjustifiable price undercutting and other practices carried out to impede competition; marketing promotions by giving inappropriate gifts and prizes redefined as unfair competition (Subparagraph 3 of Article 20 and Article 23)
   8. Revision of the provisions against businesses making other businesses engage in market competition restriction practices (Subparagraph 4 of Article 20)
   9. Deletion of Subparagraph 5 of Article 19; related matters to be subject to the Trade Secrets Act
   10. Revision of the provisions against false advertising (Article 21)
   11. Revision of the provisions against counterfeiting (Article 22)
   12. Addition of provisions regarding suspension of investigations (Article 28)
   13. Categorization of penalties (Articles 39, 40 and 42)
   14. Addition of the regulation that the duration for the competent authority to exercise its power to impose sanctions was five years (Article 41)
   15. Addition of provisions to specify that members of trade associations and other organizations could also be punishable (Article 43)
   16. Removal of the appeal procedure regulation (Article 48)
7. The seventh amendment

   The amendment to Article 47-1 was promulgated by the president on Jun. 24, 2015. It was made according to the proposal put forward by Legislators Ding Shou-zhong and Jiang Nai-xin. The provisions regarding the establishment of the Antitrust Fund and the sources and usages of the Fund were added.

8. The eighth amendment

   The amended Article 11 was promulgated on June 14th,2017 by the Presidential Decree. The proposal was put forth by Legislator Sufin Siluko and Su, Chen-Ching. The amendment included two parts: First, revision of the duration of business merger review from calendar days to workdays; Second, enhancement of the thoroughness of merger review procedures with unsolicited bids, the FTC is required to ask the party to be acquired its opinion and make the decision.