A concerted action should be preconditioned by its ability to affect market functions with respect to production, trade in goods or service provision; and whether it has reached the extent of affecting market functions should be generally determined by the criteria of quality and quantity (Taiwan)

2018.4.12
Sean Liu

The Supreme Administrative Court rendered the 107-Pan-187 Decision of April 12, 2018 (hereinafter, the “Decision”), holding that the concerted action under Article 14 of the Fair Trade Law should be preconditioned by its ability to affect market functions with respect to production, trade in goods or service provision and should be generally determined by the criteria of “quality” and “quantity.”  The “quality criterion” should be calculated by the market share of entities participating in the concerted action in the “product market.”  The Appellants (21 operators altogether) only jointly resumed the collection of machinery usage fees for the loading, unloading and handling of CFS export cargoes “weighed less than three tons.”  However, the original decision used the entire container distribution services for the “entire” CFS export cargoes to calculate the market share to make a determination.  The application of the quantity criterion was therefore erroneous.

According to the facts underlying this Decision, the Plaintiff and entities who were not a party to this litigation (21 operators altogether) jointly decided to resume the collection of machinery usage fees for the loading, unloading and handling of CFS export cargoes weighed below three tons (hereinafter, the “fees at issue”) in July 2014.  The Fair Trade Commission subsequently investigated upon complaint and concluded, on such basis, that this was an action that mutually constrained activities of enterprises, was sufficient to affect the market functions required for container distribution services and constituted a concerted action under Article 14 of the Fair Trade Law in violation of Article 15, Paragraph 1 of the Fair Trade Law.  Therefore, the original disposition was issued to demand the Plaintiff and others to desist from their illegal acts and to impose a fine of NT$1.7 million on the Plaintiff.  Dissatisfied, the Plaintiff brought an administrative action.  After the original trial court ruled against the Plaintiff, the Plaintiff appealed.

Article 14, Paragraph 1 of the Fair Trade Law provides: “The term ‘concerted action’ as used in this Law means that competing enterprises at the same production and/or marketing stage, by means of contract, agreement or any other form of mutual understanding, jointly determine the price, technology, products, facilities, trading counterparts, or trading territory with respect to goods or services, or any other behavior that restricts each other’s business activities, which are sufficient to result in an impact on market functions such as production, trade in goods or supply and demand of services.”  」。According to this Decision, whether the extent of “sufficient to result in an impact on market functions” is reached is generally determined by the criteria of “quality” and “quantity.”  In particular, the “quality” criterion is determined by the essence of a concerted action, i.e., whether the nature of competition restriction imposed by enterprises is a core matter.  The more it pertains to exclusion by core competition-restrictive means (such as prices), the more likely that it will be deemed to affect market functions.  In comparison, the “quantity” criterion is primarily determined by the number of enterprises participating in the concerted action and the market share of the concerted action, which serve as the specific indicators.

Based on the above legal provisions and criteria, this Decision affirmed that “since the essence of the concerted action engaged by the Appellants (21 operators altogether) is exclusion through core competition-restrictive means (i.e., prices), it is highly imputable” and thus the “quality” criterion was reasonably satisfied.  However, this Decision found: “Now that the ‘product market’ for the concerted action in this matter should be the container distribution service market for CFS export cargoes weighed below three tons, the market share of the Appellants (21 operators altogether) should be the ratio of the container distribution services for CFS export cargoes weighed below three tons they operated to the same type of service operated by all registered container distributors nationwide.”  In addition, “three container terminals in central Taiwan resumed the collection of the fees at issue during the end of 2013 through January 2014.”  The original decision elected to conclude that the container distribution services for “all” CFS export cargoes should be used as the calculation basis and included the business turnover of container terminals operated in central Taiwan and the volume of CFS export cargoes in the numerator.  This was unlawful for the erroneous application of applicable laws and regulations, failure to investigate evidence ex offico and insufficiency of grounds.

Based on the foregoing reasons, the Supreme Administrative Decision held in this Decision that a concerted action under Article 14 of the Fair Trade Law should be sufficient to impact market functions with respect to production, trade in goods or service provision and should be generally determined by the criteria of “quality” and “quantity.”  The “quantity criterion” should be calculated by the market share of entities participating in the concerted action in the “product market.” The Appellants (21 operators altogether) only jointly resumed the collection of machinery usage fees for the loading, unloading and handling of CFS export goods “weighed below three tons.”  However, the original decision used the entire container distribution services for the “entire” CFS export cargoes to calculate the market share to make a determination.  The application of the quantity criterion was erroneous.