Fair Trade Law Q&A - Monopoly

A1:

According to Article 3 of the Enforcement Rules of Fair Trade Law (hereinafter referred to as the Enforcement Rules), the Fair Trade Commission shall take into account the following when determining whether an enterprise constitutes a monopoly as referred to in Article 7 of this Act:

1. The market share of the enterprise in a relevant market;
2. The possibility of substitution of the goods or services amidst changes in a relevant market, giving regard to considerations of time and place;
3. The ability of the enterprise to influence prices in a relevant market;
4. Whether formidable difficulties exist to entry to a relevant market by other enterprises;
5. Import and export status of the goods or services.

In addition, taking into account domestic economic development, and to prevent imposing excessive restrictions on new industries that have minimal influence on market competition or on the business operations of small and medium-sized enterprises, as well as considering the current domestic industrial structure, Article 8 of the Fair Trade Law sets further minimum requirements, stipulating that an enterprise may not be considered as a monopoly in the absence of any of the following circumstances:

1. the market share of the enterprise in the relevant market reaches one half(1/2) of the market
2. the combined market share of two enterprises in the relevant market reaches two thirds(2/3) of the market and
3. the combined market share of three enterprises in the relevant market reaches three fourths (3/4) of the market.

Even where one of the above circumstances exists, where the market share of any individual enterprise does not reach one tenth (1/10) of the relevant market or where its total sales in the preceding fiscal year are less than the threshold amount (NT$ 2 billions) as publicly announced by the competent authority, such enterprise shall not be deemed as a monopolistic enterprise.

Furthermore, the Commission may still determine an enterprise, which under the preceding two paragraphs should not be included, to be a monopoly if the establishment of such enterprise, or the entry into the relevant goods or service market by such enterprise is subject to legal or technological restraints, or there exists any other circumstance under which the supply and demand of the market are affected and the ability of others to compete is impeded.

Relevant article(s) of law: Fair Trade Law, Article 8; Enforcement Rules to the Fair Trade Law, Article 3

A2:

Monopolistic businesses may emerge as a result of legal restrictions, manufacturers' control of needed materials or longer investment in production. For example, businesses related to public health or healthcare, water supply, petrochemical operations that require large amounts of investment in heavy machinery and pipeline installation are likely to become monopolistic. Monopolistic businesses do not necessarily have only a negative influence on the overall economy and consumer interests because of the legal or economic factors behind their formation. Basically, neutrality is adopted in the Fair Trade Law with regard to monopolistic businesses. In other words, such monopolization is not prohibited. However, abuse of market status and impediments to fair competition by monopolistic businesses are forbidden. Hence, "Monopolization"is not necessarily in violation of the Fair Trade Law.

A3:

According to Article 9 of the Fair Trade Law, "Monopolistic enterprises shall not engage in any one of the following conducts: 1) directly or indirectly preventing any other enterprises from competing by unfair means; 2) improperly setting, maintaining or changing the price for goods or the remuneration for services; 3) making a trading counterpart give preferential treatment without justification; and 4) engaging in other abusive conduct by using its market power."

If a monopolistic enterprise requests its upstream supplier not to provide materials to another business intending to manufacture the same products and thus makes it impossible for such a business to enter the market, it may be in violation of the regulation against "directly or indirectly preventing any other enterprises from competing by unfair means."If a monopolistic enterprise sells its products at rates lower than the variable costs to force another business to withdraw from the market as a result of becoming unable to cope with losses, it may be in violation of the regulation against "improperly setting, maintaining or changing the price for goods or the remuneration for services."Meanwhile, "making a trading counterpart give preferential treatment without justification"often occurs when the buyer is a monopolistic enterprise, such as an enterprise unilaterally determining its purchasing prices at rates lower than market standards and demanding that its trading counterparts sell their products at such rates. As for "other abusive conduct by using its market power,"it is an inclusive regulation mainly aimed at areas that the three preceding subparagraphs fail to cover. An evaluation has to be made according to the conditions of each case to decide whether there is any violation.

Relevant article(s) of law: Fair Trade Law, Article 9