January 2024
Aaron Chen, Oli Wong, Sally Yang
In 2023, Taiwan’s Fair Trade Commission (referred to as “TFTC”) significantly strengthened the enforcement of concerted action in response to economic changes such as the rise in raw material prices and overall inflation. During the year, the TFTC also handled several major merger cases. This article focuses on reviewing the amendments to competition regulations related to restrictive competition in 2023 and highlights significant restrictive competition cases handled by the TFTC until 2023.
I. Review of Concerted Action Cases
A. 2023 Major Concerted Action Cases
In 2023, the TFTC imposed penalties on industries such as daily necessities and tourism services for engaging in concerted actions. Instances included discussions on fee standards through Line or WeChat groups, leading to the TFTC identifying and determining explicit concerted actions among businesses. [1] The TFTC imposed substantial fines in two cases presumed mutual understanding of concerted actions:
(1) Pre-mixed concrete producers coordinating trading partners and avoiding mutual competition[2]
TFTC regarded three nationwide pre-mixed concrete producers and fifteen regional producers in Taoyuan City as engaging in activities such as regular gatherings to discuss and coordinate the allocation of trading partners, mutual exchange of price quotation information, and forming market research groups to monitor each other, all aimed at avoiding mutual competition. The TFTC imposed fines ranging from NT$500,000 to NT$50,000,000 on these entities, with a total fines amounted to NT$213,100,000.
(2) Joint cancellation of tariff discounts by Chunghwa Telecom and Taiwan Mobile[3]
Chunghwa Telecom Co., Ltd. (referred to as “Chunghwa Telecom” )and Taiwan Mobile Co., Ltd. (referred to as “Taiwan Mobile” )jointly decided to cancel the promotional offer for unlimited 4G internet pacakge on the same day. Although Taiwan Mobile claimed it was merely a “follow-up action,” [4] the TFTC found evidence of internal communication within Taiwan Mobile, indicating Taiwan Mobile followed up by canceling the promotional offer shortly after a meeting resolution within Chundwa Telecom. Given the close timing, the TFTC determined that there must have been an information exchange between the companies, leading to the possibility of forming a consensus and achieving the joint cancellation of the promotional offer.
In additional, in cases like “Yi Jen General Hospital and Tian Cheng Hospital’s joint increase in registration fees”[5] and “Taipei Oxygen Co., Ltd. and National Taiwan University Oxygen Co., Ltd.’s joint increase in medical oxygen prices,” [6] the TFTC did not find direct evidence of communication forming an agreement. However, due to the proximity in timing or consistent pricing behavior, the TFTC, in its dispositions, indicated that there must be a prior agreement for such a consistent behavior and thus presumed a mutual understanding between businesses.
B. Investigation of Professional Associations Forming Price Constraints
The TFTC imposed penalties in multiple cases involving professional associations, such as a case involving setting unified appraisal fees by the National Union of Civil Engineering Technicians[7], a case involving the joint decision of the Chinese Union of Professional Civil Engineers Association and local unions of professional civil engineers associations to determine the remuneration for engineers hired by construction firms collectively [8], and a case involving the Galvanizing Association sends a suggested price list to its members. [9] The TFTC considered such actions as limiting price competition and affecting relevant market supply and demand functions. Regardless of whether such price lists are binding and have different effects, the TFTC considered that such actions constitute concerted actions and thus imposed fines. Professional associations are advised to avoid formulating any similar price constraints.
II. Amendment on Merger Regulations and Case Review
A. Amendments on Merger Regulations
In 2023, the TFTC amended regulations related to merger review to facilitate effectiveness, including changes to the “Mergers Types to Which Paragraph 1 of Article 11 of the Fair Trade Act Does Not Apply” and the ” Fair Trade Commission Disposal Directions (Guidelines) on Handling Merger Filings ” The amendments introduced types of mergers that do not require reporting, expanded the scope of simplified procedures, and annulled the “Fair Trade Commission Disposal Directions (Guidelines) on Extraterritorial Mergers” . These changes aimed to reduce the burden on businesses in merger reporting and expedite the merger review process. [10]
B. Major Merger Cases
The TFTC handled several major domestic merger cases in 2023, and the TFTC approved the merger with additional conditions or undertakings rather than prohibiting mergers to ensure that overall economic benefits outweigh potential competition disadvantages. Examples include:
(1) Merger of Uni-President Corporation and Presicarre Corporation [11]
In May 2023, the TFTC acknowledged concerns about the merger case potentially leading Uni-President to leverage its advantageous position with channel distributors to strongly promote its own brand or provide disparate treatment to suppliers, thereby increasing bargaining power with upstream suppliers and potentially undermining competition in the downstream retail market. However, in the assessment of overall economic benefits, the TFTC believed that the merger would contribute to stabilizing Presicarre Corporation’s operations, maintaining its corporate culture, safeguarding the rights of employees and consumers, and reinforcing market competition through the benefits of vertical and diversification integration. Consequently, the TFTC decided not to prohibit the merger but imposed additional undertakings to ensure compliance.
(2) Merger of Far EasTone Telecommunications Co., Ltd. and Asia Pacific Telecom Co., Ltd. [12]
In July 2023, the TFTC acknowledged concerns about the merger case potentially causing anti-competitive issues in the mobile broadband service market, such as unilateral tariff increases or adopting coordinated behaviors with other operators. However, in the evaluation of overall economic benefits, the TFTC believed that the merger would still contribute to the development of 5G application services and reduce redundancy in core network construction, thereby enhancing machinery and electricity utilization efficiency. Moreover, considering Asia Pacific Telecom’s consecutive losses leading to operational difficulties, the TFTC believed that allowing the merger with Far EasTone Telecom could yield greater overall economic benefits. Therefore, the TFTC ultimately decided not to prohibit the merger but imposed additional undertakings to ensure compliance.
(3) Merger of Taiwan Mobile Co., Ltd. and Taiwan Star Telecom Corporation Ltd. [13]
In October 2023, the TFTC acknowledged concerns that the merger might lead to a further reduction in the number of broadband service providers in the domestic market, potentially increasing market concentration and raising prices. However, after the implementation of the merger between Taiwan Mobile and Taiwan Star, Taiwan Mobile demonstrated that through the integration of Taiwan Star’s spectrum, network, and human resources, it could improve spectrum efficiency, coverage, and network quality. This integration was seen as contributing to the development of 5G application services. Moreover, the consolidation of radio frequency equipment and core networks could reduce redundant construction of facilities like data centers and base stations, aligning with energy conservation and carbon reduction policy objectives. Considering these overall economic benefits, the TFTC ultimately decided not to prohibit the merger but imposed additional undertakings to ensure compliance.
III. Review of Vertical Restraint of Competition Cases
In 2023, the TFTC handled a resale price maintenance case, imposing a fine on Abbott Laboratories Services LLC for restricting the resale price of medical equipment products. The TFTC deemed this practice weakened price competition among downstream businesses without reasonable justification, imposing a fine of NT$300,000. [14]
In a case involving non-price vertical restraint of competition violations under Article 20 of Fair Trade Act, the TFTC penalized Pao Lien Optical Co., Ltd. for signing product distribution contracts with contact lens suppliers. The contracts outlined the most favorable supply prices for goods and promotional activity terms, limiting the business activities of contact lens suppliers. The FTC deemed this behavior to have anticompetitive effects, violating Article 20, Paragraph 5 of the Fair Trade Act. Pao Lien Optical Co., Ltd.was ordered to cease illegal practices and fined NT$500,000. [15]
IV. Other Major Events
A. On June 6, 2023, the TFTC announced a draft amendment to certain provisions of the Fair Trade Act, soliciting public opinions until August 5, 2023. The proposed amendments include adjusting the threshold for merger reporting, expanding the scope of concerted actions, and amending administrative investigation matters. [16] As of the writing of this article, the TFTC is still reviewing the proposed amendments based on suggestions from various stakeholders. [17]
B. In response to the rise of the digital economy, the TFTC amended the ” Principles of the Fair Trade Commission Regarding the Definition of Relevant Markets” in November 2023, effective immediately. These guidelines introduced definitions for “multilateral markets” and “indirect network effects,” increased considerations for relevant product and geographic markets, and added provisions for market analysis using hypothetical monopolist testing in multilateral market structures.
V. Conclusion
The TFTC’s legislative and enforcement actions in 2023 are closely related to the “White Paper on Competition Policy in the Digital Economy” released at the end of 2022. In the era of the digital economy, the TFTC has actively researched relevant issues, listened to various opinions, and implemented multiple reform measures. It is expected that the Fair Trade Commission will continue to shape future enforcement policies and strategies of the Fair Trade Act based on the ” White Paper on Competition Policy in the Digital Economy “. [18]
As of the writing of this article, the TFTC’s “White Paper on Competition Policy in the Digital Economy” has been nominated for the Concurrences 2024 Antitrust Writing Awards, competing with reports from competition law authorities in Australia, New Zealand, Hong Kong, Singapore, and Japan for the regional best “Soft Law” research award. This award recognizes achievements in the field of competition law internationally, and the nomination of the TFTC’s White Paper on Competition Policy in the Digital Economy reflects international recognition. The award also allows public participation in voting, and interested readers are encouraged to participate at the following website: https://awards.concurrences.com/en/awards/2024/soft-laws-studies/white-paper-on-competition-policy-in-the-digital-economy
[1] TFTC’s Gong-Chu-Zi No. 112007 disposition dated 18 Feburary 2023, and TFTC’s Gong-Chu-Zi No. 112015 disposition dated 9 March 2023.
[2] TFTC’s Gong-Chu-Zi No. 112008 disposition dated 20 Feburary 2023. Please refer to LTP’s April 2023 newsletter for further introduction: A Heavy Fine in Excess of NT$200 Million Slapped on 18 Ready-Mix Concrete Suppliers by the Taiwan Fair Trade Commission for Concerted Action.
[3] TFTC’s Gong-Chu-Zi No. 112068 disposition dated 14 September 2023.
[4] TFTC’s Gong-Chu-Zi No. 112068 disposition dated 14 September 2023. It explained “follow-up action” as “businesses observing the actions taken by competitors in the “market,” each independently following and implementing these actions without considering their own interests but in response to market supply and demand. This leads to outwardly consistent market behavior, meaning observable and transparent actions in the contested market. Businesses can readily observe and imitate these actions, leading to the adoption of similar measures.”
[5] TFTC’s Gong-Chu-Zi No. 112086 disposition dated 17 November 2023.
[6] TFTC’s Gong-Chu-Zi No. 112088 disposition dated 27 November 2023.
[7] TFTC’s Gong-Chu-Zi No. 112025 disposition dated 5 May 2023.
[8] TFTC’s Gong-Chu-Zi No. 112097 disposition dated 21 December 2023.
[9] TFTC’s Gong-Chu-Zi No. 112072 disposition dated 21 September 2023.
[10] Please refer to LTP’s September 2023 newsletter for further introduction on 2023 merger regulations review: Review and Outlook of Amendments to Taiwan’s Pre-merger Filing Regulations.
[11] TFTC’s Gong-Jie-Zi No. 112001 decision dated 8 May 2023 .Please refer to LTP’s June 2023 newsletter for further introduction: Taiwan Fair Trade Commission Approved of the Merger of Uni-President and PresiCarre.
[12] TFTC’s Gong-Jie-Zi No. 112002 decision dated 21 July 2023. Please refer to LTP’s August 2023 newsletter for further introduction: Taiwan Fair Trade Commission Approved of the Merger of Far EasTone and APT.
[13] TFTC’s Gong-Jie-Zi No. 112003 decision dated 12 October 2023.
[14] TFTC’s Gong-Chu-Zi No. 112082 disposition dated 13 October 2023.
[15] TFTC’s Gong-Chu-Zi No. 112006 disposition dated 9 February 2023. Please refer to LTP’s April 2023 newsletter for further introduction: Most Favored Price Clause Penalized by the Taiwan Fair Trade Commission.
[16] Please refer to LTP’s July 2023 newsletter for further introduction: The Fair Trade Commission of Taiwan Preannounces Draft Amendments to the Fair Trade Act.
[17] Point 7 (2) of TFTC’s 1682nd commission meeting minutes dated 3 January 2024.
[18] Please refer to LTP’s December 2023 newsletter for further introduction: The Principles of the Fair Trade Commission Regarding the Definition of the Relevant Markets Amended by the Taiwan Fair Trade Commission.
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