April 2023
Aaron Chen and Sally Yang
The Taiwan Fair Trade Commission (hereinafter, the “TFTC”) formally released the White Paper on Competition Policy in the Digital Economy (hereinafter, the “White Paper”) on December 20, 2022.
Although the White Paper is titled The White Paper on Competition Policy in the Digital Economy, still a closer look at the White Paper reveals that the scope of the TFTC’s enforcement policy is not limited to the digital economy. Especially with respect to regulatory proposals, the White Paper also clearly states that “changes in enforcement techniques are not limited to the digital economy, but also cover other areas of economic activities.”[1]
Therefore, five enforcement positions disclosed by the TFTC in the White Paper are hereby extracted for the attention of all kinds of enterprises:
1. Inclusion of the market power of an enterprise in the considerations of resale price maintanence conduct
In the early years, the TFTC’s practical opinion[2] was that it was not necessary to consider the market power of the enterprise when examining the resale price maintanenceconduct under Article 19 of the Fair Trade Act. However, there seems to be a trend that TFTC’s opinions have been changing in recent years. For example, the minutes of the TFTC’s 1585th and 1586th Commissioners’ Meetings reveal the conclusion that since the resale price maintanence conduct did not achieve any anticompetitive effect as the market share of the enterprise was only 0.44%, such conduct did not violate Article 19 of the Fair Trade Act, and no penalty would be imposed.
The TFTC also stated in the White Paper that its future enforcement should include “market power” as an important element in the examination of cases involving resale price maintanence conduct, and take into account the “market power” of the enterprise concerned in the relevant market. The TFTC stated its reasoning that only a vertical restriction conduct involving significant market power is likely to have an anti-competitive effect, and when such a restriction is implemented by an enterprise that does not have significant market power, trading counterparts still have trading opportunities with alternative enterprises.
However, the White Paper does not indicate the specific market share threshold that will be considered for resale price maintanence cases. For example, it is unclear and remains to be seen whether the threshold will be a “15% share of the market”[3] as compared to that for vertical non-price restriction cases.
2. No more use of “relatively dominant position” to determine the anti-competitive potentials of vertical restrictions
The TFTC resolved in its Commissioners’ Meeting[4] in 2016 that for vertical non-price trading restriction cases, if the market share of an enterprise does not reach 15%, but if there is no sufficient and expected possibility that the counterparty to the transaction may deviate from the trade, it should be deemed that there is dependence between the enterprises and that the enterprise has a relatively dominant position in the market, and the conduct of restricting competition may still be regulated in accordance with Article 20 of the Fair Trade Act.”
However, the TFTC stated in the White Paper that since “relative dominant market position” only relates to a specific transaction and not to the entire relevant market, such consideration would lack an analysis of the competitive impact on the entire market. Therefore, for the anti-competitive conduct of an enterprise whose market share has not reached 15%, the TFTC will explore whether it should regulate the anti-competitive conduct only in accordance with Article 25 of the Fair Trade Act, instead of determining if this is a consideration factor for determining if it constitutes the “anti-competitive potentials” under Article 20 of the current Fair Trade Act based on whether it has a “relatively dominant position.” Therefore, the anti-competitive conduct of an enterprise with a “relative dominant market position” whose market share has not reached 15% will be primarily regulated under Article 25 of the Fair Trade Act.
3. Enforcement attitude towards decisions on killer acquisition and uncontested merger
The White Paper mentions that for some new start-ups, acquisition by large enterprises may be one of the incentives for technological innovation. Therefore, the TFTC will also take such positive benefits into account when reviewing merger cases. The White Paper also states that since most of the companies in Taiwan are “implementers” rather than “developers” of key technologies, the extent of competition and the need for intervention in killer acquisition cases in Taiwan may not be similar to the circumstances in other countries.
The White Paper states that the TFTC will “prudently assess” if an uncontested merger may be further challenged by referring to the provisions on the revocation of an administrative disposition under the Administrative Procedure Act, since this involves the protection of legitimate expectation, legal stability, and predictability of the parties. From this perspective, it appears that the TFTC has not yet considered a more stringent review of mergers and acquisitions in the technology industry, or allowing ex post changes to its review conclusions in line with the law enforcement trends in the United States.
4. Exploration into the inclusion of vertical upstream-downstream trading relationship in the scope of concerted action
According to the White Paper, in reference to the case involving the agreement between Apple Books and five major publishers in the United States, if a platform owner abuses its market power to require suppliers to sign the most favored customer clause, this will result in the convergence of their product prices. Under the current legal regime, suppliers participating in concerted action under the above-mentioned circumstances may be penalized in accordance with Article 14 of the Fair Trade Act, and operators that implement the most favored customer clause may be sanctioned in accordance with Article 20, Subparagraph 4 of the Fair Trade Act. However, since the penalty for violating the prohibition against concerted action is more severe than that for the breach of the prohibition against vertical trading restrictions, the circumstances where the penalty for the dominant party (platform owner) is lower than that for the other cooperating parties (suppliers) will take place.
Therefore, the TFTC stated that when the Fair Trade Act is amended in the future, the conduct of vertical collusion will be included in the regulatory scope of Article 15 of the Fair Trade Act, similar to the framework of the U.S. antitrust law and the EU competition law.
5. Promotion of legal revision to enhance TFTC’s market investigation authority
Pursuant to the current legal provisions, the TFTC only has the authority to investigate individual cases “involving violations of the provisions of the Act that jeopardize public interests,” but it does not have the authority to initiate industry-wide investigations in all cases. Since the accuracy of a competitive analysis is crucial to a correct understanding of the market structure, the White Paper states that it intends to enhance this market investigation authority when the Fair Trade Act is amended in the future. However, the TFTC has not further elaborated on the manner of the enhancement.
[1] Page 213, The White Paper on Competition Policy in the Digital Economy.
[2] The TFTC’s Gong-Chu-104110 Disposition.
[3] The minutes of the 1267th TFTC Commissioners’ Meeting.
[4] The minutes of the 1267th TFTC Commissioners’ Meeting
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