Fair Trade Law Q&A - Other Restrictive Trade Practices

Restrictions imposed by an enterprise on the sales territories of its distributors generally fall within the scope of "imposing improper restrictions on its trading counterparts' business activity as part of the requirements for trade engagement" under Subparagraph 5, Article 20 of the Fair Trade Act. However, territorial restrictions are not per se unlawful. Such conduct may violate the Fair Trade Act only where the enterprise is unable to demonstrate legitimate business justifications and where the territorial restraint is likely to impede or restrain competition in the relevant market. In determining whether such restrictions are improper, the Fair Trade Commission shall conduct a comprehensive assessment of relevant factors, including the undertaking's intent and purpose, market position, market structure, product characteristics, the manner in which the restraint is implemented, and the actual or potential effects on market competition.

Relevant Provisions: Article 20 of the Fair Trade Act; Article 28 of the Enforcement Rules of the Fair Trade Act